Management Accounting Systems and Organizational Con®guration: A Life-Cycle Perspective

Accounting, Organizations and Society 26 (2001) 351±389
www.elsevier.com/locate/aos
Management accounting systems and organizational

con®guration: a life-cycle perspective
Ken Moores a, Susana Yuen b,*
a
Bond University, Gold Coast, Qld 4227, Australia
b
Department of Accountancy, Hong Kong Polytechnic University, Hung Hom, Hong Kong
Abstract
This study adopts a con®gurational approach that captures possible variables (strategy, structure, leadership and
decision-making styles) and their relationships with management accounting systems (MAS) from an organizational
life-cycle perspective. Using Miller and Friesen's life-cycle model (Miller, D., & Friesen, P. H. (1983). Successful and
unsuccessful phases of the corporate life cycle, Organization Studies, 339±356; Miller, D., & Friesen, P. H. (1984). A
longitudinal study of the corporate life cycle, Management Science, 1161±1183), a set of hypotheses were tested with data
from mail survey and ®eld studies of ®rms in the clothing and footwear industry. Results indicated that MAS formality
changed to complement organizational characteristics across life-cycle stages. In uncovering how and why MAS formality
changed during organizational development, our results indicate that it is growth ®rms that pay particular attention to
increasing the formality of their MAS. Furthermore, between stages, it is the selection of management accounting tools
that dominates the presentation of information in explaining the dierent MAS life-cycle stage designs. While based on
cross-sectional data, the homogeneity of organizational con®gurations at each life-cycle stage does suggest that these
results imply a longitudinal development of MAS. # 2001 Elsevier Science Ltd. All rights reserved.
1. Introduction contextual factors.2 Gordon and Miller (1976) was

among the ®rst to encourage this line of contingency-
Over the last 20 years, researchers have attempted based inquiry when it posited that MAS are asso-
to explain observed variations in management ciated with environmental, organizational and
accounting systems (MAS)1 in terms of a range of decision-making style factors. Subsequent research-
ers have investigated these factors as individual
and interactive variables to explain variations in
* Corresponding author. Fax: +852-2356-9500. MAS with mixed results (Moores & Chenhall,
E-mail address: acsyuen@inet.polyu.edu.hk (S. Yuen). 1994; Otley 1980; Otley & Wilkinson, 1988).
1
Although there are some slight disparities in the conceptual
de®nitions of MAS, they all refer to three aspects: (1) the It is notable that most MAS researchers have
formality of the routines and procedures; (2) the fact that such overlooked the second part of Gordon and Miller's
systems deal with information; and (3) a focus on patterns of (1976) suggestion that many of the contextual
activities (Simons, 1992). variables would cluster together as ``commonly
2
Examples of these studies include Amat, Carmona and
occurring con®gurations'' or `àrchetypes''. Accord-
Roberts (1994); Bruns and Waterhouse (1975); Chenhall and
Morris (1986); Govindarajan (1984); Otley (1978, 1990); Ross ingly, they recommended that rather than analyz-
(1995); Selto, Renner, and Young (1995); Simons (1987, 1990, ing an `ùnmanageable'' number of permutations
1991, 1994). of variables, MAS researchers need only to focus
0361-3682/01/$ - see front matter # 2001 Elsevier Science Ltd. All rights reserved.
PII: S0361-3682(00)00040-4
352 K. Moores, S. Yuen / Accounting, Organizations and Society 26 (2001) 351±389
on a few select variables from which a host of Child (1977) suggested that every organization is
peripheral factors generally follow. located within a particular con®guration of con-
Miller (1981) also highlighted not only the systemic tingencies derived from its own context. These
nature but also the internal consistency of con®gura- contingencies depend on the market and techno-
tional approaches. He found that most changes in logical environment in which the organization
any one variable, such as controls, would be dys- operates, its scale and diversity of operations, the
functional unless accompanied by changes in other technology applied to its work and the type of
variables such as centralization or technology. Miller personnel it employs. To achieve congruence, an
(1981) emphasized that a complementary alignment appropriate design is the one which best suits the
among organizational variables, as a con®guration, is contextual and operational contingencies that
an important determinant of performance. apply. To be internally consistent, organizations
The aim of this paper is to return to Gordon must have tightly interdependent and mutually
and Miller's (1976) suggestion by exploring whether supportive parts in terms of strategies, structures
one such con®guration, based on organizational and processes (Miller, 1981, 1987a, 1990, 1996;
life cycles, is systematically associated with Mintzberg, 1990; Miller & Mintzberg, 1983; Tosi
observed variations in MAS. Thus far, life-cycle & Slocum, 1984).
con®gurations have been found to manifest as Dierent types of con®gurations have emerged
dierent patterns of strategies, structural charac- in the organizational theory literature. For example,
teristics, leadership and decision-making styles at strategic archetypes demonstrate dierent patterns
various stages of organizational development of action in striving against competition. These
(Miller & Friesen, 1984). Accordingly, the objective recurring patterns have been identi®ed and found
of this paper is to explore whether dierent life- to cluster into con®gurations in terms of competitive
cycle con®gurations help in explaining variations strategies (Miles & Snow, 1978; Mintzberg, 1973;
in MAS. This exploratory study addresses the fol- Utterbeck & Abernethy, 1975). There has been
lowing questions: some limited application of strategic archetypes in
contingency-based MAS research (e.g. Simons,
1. Do MAS dier across stages of development 1987, 1990; Abernethy & Guthrie, 1994).
(life cycle)? While empirical evidence has indicated the
2. And if so, impact of strategic archetypes on MAS, this type
a. do these dierences constitute a pattern of of con®guration fails to include other variables
change? previously shown to be associated with MAS.
b. what is the nature of the dierences?
3
In the organizational behavior and theory literature, the
2. Organizational con®gurations term ``con®guration'' is often viewed as synonymous with both
``gestalt'' and `àrchetypes'' (Dess, Newport & Rasheed, 1993).
Con®gurations may be represented by typologies developed
An organization is often interpreted as a con- conceptually or captured in taxonomies derived empirically
®guration3 or archetype of dierent character- (Miller, 1986, 1987a, 1987b; Meyer, Tsui & Hinings, 1993). A
istics. According to Meyer, Tsui and Hinings con®guration also contains relationships among elements or
(1993), organizational con®gurations refer to any items representing multiple domains. Miles and Snow's (1978)
classi®cation of organizations into defenders, prospectors, ana-
multidimensional con®guration of conceptually lyzers, and reactors uses multiple domains (strategy, structure,
distinct characteristics that commonly occur process and environment) and therefore, clearly represents
together. Numerous dimensions of external context con®gurations or archetypes (Dess et al., 1993). When such
(such as environments, industries and technolo- con®gurations represent frequently occurring and adaptive
patterns and scenarios that have predictive values, they are
gies) and internal organizational characteristics
called ``gestalts''. Adaptive patterns refer to con®gurations of
(such as strategies, structures, cultures, processes, attributes at a point in time, while adaptive scenarios imply the
practices and outcomes) have been said to cluster processes by which these attributes relate over time (Miller,
into con®gurations. 1981).
K. Moores, S. Yuen / Accounting, Organizations and Society 26 (2001) 351±389 353
Gordon and Miller (1976) encouraged broader Most MAS studies to date have focused on the
con®gurations which represent typical agglomera- static relationships between variables, with little
tions of environmental, organizational and decision- attempt to address the ``dynamic quality of organ-
making attributes. These agglomerations were izational life'' as claimed by Kimberley and Miles
identi®ed as `àrchetypal'' ®rms by Miller (1976), (1980). They fail to provide evidence of processes
each having dierent information systems. and reasons for which MAS might change. Moores
Miller's subsequent research has developed a (1990) has developed conceptual arguments for
more comprehensive but dynamic form of con®g- dierent characteristics of management control
uration to classify organizations in terms of their systems across organizational life cycles. He
stages of development. Organizations undergo a maintains that there are points in the life of a
series of adaptations representing development company where too much control can sti¯e crea-
stages known in the literature as organizational tivity and hinder its development. In order to
life cycles (Dodge, Fullerton & Robbins, 1994; examine MAS from a dynamic perspective, life-
Dodge & Robins, 1992; Kimberley & Miles, 1980; cycle theory is applicable as it implies episodic
Miller & Friesen, 1983, 1984; Quinn & Cameron, changes of organizational and contextual charac-
1983). In particular, it has been found that as teristics which are expected to have signi®cant
organizations grow through expanding their range impacts on MAS designs.
of products or services in response to more mature
and saturated markets, they inevitably confront 2.1. Organizational life cycles and MAS
increasingly heterogeneous and hostile environ-
ments (Adizes, 1979; Miller & Friesen, 1984; Evidence reveals that internal characteristics of
Quinn & Cameron). Miller and Friesen (1984) organizations and the external contexts in which
found that coinciding with this, increasing environ- they are operated, change across life-cycle stages
mental complexity ®rms at each stage have dierent and in fact they de®ne such stages. There are
con®gurations, being patterns4 of internally con- numerous multi-stage life-cycle models that use a
sistent organizational characteristics (strategy, diverse array of characteristics to describe organiza-
structure, leadership and decision-making styles). tional development phenomena, such as individual
This need for internal consistency at each orga- cognitive orientation, structure, strategy, leadership
nizational life-cycle stage has implications for a style, critical development areas, problems and
®rm's MAS. For example, growing ®rms are environmental conditions (Alexander, Fennell &
associated with a bold, innovative and organic Halpern, 1993; Bruderl & Schussler, 1990; Dodge
orientation, while mature and declining ®rms & Robins, 1992; Dodge et al., 1994; Gupta &
demonstrate conservative practices and encroaching Chin, 1990, 1993; Ingham, 1992; Kimberley &
bureaucracy. As ®rms develop, more complex Miles, 1980; Koberg, Uhlenbruck & Sarason,
structures and more sophisticated decision-making 1996; Miller & Friesen, 1983, 1984; Milliman &
styles prevail. To cope with these changes, organiza- Von Glinow, 1991; Quinn & Cameron, 1983;
tions have little choice but to be more information- Smith, Mitchell & Summer, 1985). Nevertheless,
based (Miller & Friesen, 1983). The challenge for the consensus among these models is that changes
management accountants is to ensure that infor- in an organization follow a predictable pattern
mation is relevant, accurate and timely, by being across discrete stages of development over time
adaptable to the varying management needs (Dodge et al.; Quinn & Cameron). Creation and
across life-cycle stages. development of a viable enterprise are character-
ized by a struggle for autonomy and resources,
followed by expansion and then stability and insti-
4
tutionalization. Accordingly, organizational char-
Using Ginsberg (1988) terminology, Dess et al. (1993)
describe changes within a con®guration as changes in ``magni-
acteristics vary across life-cycle stages to respond
tude'', whereas a change from one particular con®guration to to the turbulence of continual environmental
another as a change in ``pattern''. changes.
To explore MAS design from both dynamic and organizations eventually face the need to change,
con®gurational perspectives, it is proposed to questions relating to what causes a given system
develop a research framework by including the state to persist or cease to exist, or what are the
organizational life cycle as a construct for three patterns of succession among system states,
reasons. First, life-cycle theory has been widely become permeable (Fry & Smith, 1987). However,
supported conceptually and empirically in the these questions have been seldom examined in
organizational behavior literature. Conceptually, prior MAS research. Application of the life-cycle
dierent life-cycle models have been developed, concept to MAS research may provide a better
each of which emphasizes unique sets of organiza- theoretical foundation than the contingency frame-
tional characteristics across stages of development work in identifying dierent laws of relationship
(Adizes, 1979; Greiner, 1972; Kimberley & Miles, (interaction) within various system states (life-
1980; Miller & Friesen, 1983; Quinn & Cameron, cycle stages).
1983; Scott, 1971). According to life-cycle theory, Second, adaptation is suggested as a useful and
the developing entity has within it an underlying promising metaphor for conceptualizing an orga-
form, logic, program, or code that regulates the nization's endeavors to be better ®tted into its
process of change and moves the entity from a environment (Chakravarthy, 1982). Identi®cation
given point of departure toward a subsequent end of MAS attributes at dierent life-cycle stages is
that is predicted in the present state (Van de Ven & an appropriate way to demonstrate such adapta-
Pole, 1995). Empirically, life-cycle models provide tion. In turn, such research will yield predictive
evidence of predictability of organizational transi- ®ndings and the adaptive pattern at each stage will
tion from stage to stage.5 These ®ndings have provide prescriptions for MAS design in achieving
reinforced the life-cycle concept in that important organizational eectiveness.
variables and their interrelationships with con- Third, organizational life cycles are appropriate
tingencies are dierent as organizations grow and in providing patterns of multiple contingencies
develop. Existing contingency frameworks adopted and ®rms' internal characteristics that have been
in MAS research have nevertheless seldom suggested under the systems approach. Given dif-
addressed the question of possible changes in system ferent con®gurations of internal characteristics at
states within which the model operates.6 As all each life-cycle stage, one can analyze the internally
consistent relationship of each of the distinctive
5
patterns with MAS, and in turn the implications of
These life-cycle studies include Baker and Cullen (1993);
Dodge and Robbins (1992), Dodge et al. (1994), Gray and such relationship for organizational eectiveness.
Ariss (1985), Gupta and Chin (1993), Ingham (1992), Kazan- The choice of an appropriate life-cycle model to
jian (1988), Kazanjian and Drazin (1990), Kimberley and Miles identify dierent con®gurations in complex set-
(1980), Miller and Friesen (1983, 1984), Robinson, Pearce, tings is crucial. For the purpose of this paper, two
Vozikis and Mescon (1984), Quinn and Cameron (1983), Smith
criteria have been set for the model selection.
et al. (1985).
6
Dubin's (1976, 1978) analysis of a theoretical model indi- First, the model should cover a complete cycle of
cated that it is composed of determinant units that are inter- organizational development as a biological series
related by speci®c laws within de®ned boundaries. Because all from birth to death. Second, the model should
regions within the boundary of a theoretical model may not be have been tested or supported empirically. Miller
identical or homogeneous, the dierent states within which the
and Friesen (1980a, 1983, 1984) developed ®ve life
model or theoretical system operated must be speci®ed. A sys-
tem state is a condition where the theoretical system as a whole stages for their longitudinal studies: birth, growth,
has three distinctive features: (1) all units of the system have a maturity, revival and decline. This model has been
value or distinctive range of values in that state; (2) the char- tested in a number of studies (Miller & Friesen,
acteristic values are determinant, i.e. they are measurable for 1980a, 1980b, 1983, 1984). The results supported
the particular state and distinctive or unique for the state of the
the reliability and validity of the model, indicating
system and; (3) the state persists through some periods of time
which is highly ¯exible (Fry & Smith, 1987). Life-cycle models distinctive inter-stage dierences as expected.
meet the criteria as set by Dubin (1976, 1978) for theory build- Also, Miller and Friesen's (1983, 1984) approach
ing. to pattern analysis of the life-cycle typology is
compatible with systems approach to ®t.7 The As evidenced in the organizational literature,
Miller and Friesen's (1980a, 1983, 1984) life-cycle strategies, structures, and management styles vary
model thus meets both selection criteria and systematically across life-cycle stages in order to
accordingly is adopted in this study. The patterns be congruent with external contexts (Miller, 1981).
of organizational characteristics across the model's These factors cluster together as unique patterns
®ve life-cycle stages are summarized in Table 1.8 at each stage constituting life-cycle con®gurations.
As organizations develop across life-cycle Accordingly, this framework suggests that ®rms
stages, designing eective MAS becomes part of have to adjust their MAS attributes to be `ìnternally
the adaptation processes. With increasing levels of consistent'' with the prevailing life-cycle con®gura-
administrative complexity, ®rms tend to escalate tion at each stage. The research framework does
their information processing eorts across life- not explicitly include contextual variables (such as
cycle stages. Speci®cally, ®rms expand their use of environment and size) as they are embedded in
intelligence systems that provide mechanisms for organizational life-cycle stages (Fig. 1).
scanning the environment, eective control and
communication (Miller & Friesen, 1983). In view 3.1. Conceptual de®nitions of variables and
of the changes in information requirements, rationale for their relationships
accountants have to consider how MAS attributes
dier across life-cycle stages. For the purpose of this paper, the construct,
MAS attributes, is conceptualized as formality of
routines and procedures with greater use of com-
3. Research framework puters, technical sta, and ®nancial modeling
(Merchant, 1981, 1997; Simons, 1992, 1999). Such
This paper proposes a research framework that formal systems make available information which
captures key variables in terms of con®gurations is expected to ful®l certain qualitative character-
and their relationships with MAS from the orga- istics in order to be selected and presented for
nizational life-cycle perspective (Fig. 1). Analysis decision-making purposes. This is consistent with
of life-cycle con®gurations can help derive some the recommendations of the Statement of Account-
general notions concerning their cohesion and ing Concepts (SAC) 3 (1990) ``The Qualitative
dynamics, and their implications for MAS design Characteristics of Financial Information''. The
in achieving eectiveness. Statement identi®es those attributes (qualitative
characteristics) that ®nancial information should
7
Van de Ven and Drazin (1985) identi®ed three approaches to possess if it is to serve the speci®ed objectives.
®t that have emerged in the literature namely, selection, inter- These attributes can be applied to MAS design
action, and systems approaches. Under the selection approach, and be indicative of the qualities that managers
®t is the congruence of an organization's design to its external can expect of the information provided to them.
context as a result of either natural or managerial selection.
The interaction approach examines the impact of congruence,
The ®rst dimension as suggested by SAC 3,
between the external context and organizational structure, on Selection of Information, is similar to the ``con-
performance. The systems approach goes beyond mere content'' dimension or ``tools used'' in MAS as dis-
gruence by also embracing the notion of internal consistency. cussed in the management accounting literature.
This approach postulates that an organization's eectiveness Under this dimension, information systems should
results from both the congruence of its strategic, structural and
managerial characteristics with external contextual factors and
process or provide information that satis®es the
the internal consistency of such organizational characteristics. concepts of relevance and reliability and which
These alternative approaches to ®t have implications for theory passes the materiality test. The second dimension,
development, data collection and statistical analysis (Duncan & Presentation of Information, is similar to the
Moores, 1989; Van de Ven & Drazin, 1985). ``form'' dimension of MAS. Systems should pre-
8
As this paper focuses on MAS, it would be too lengthy to
include a detailed discussion of the organizational character-
sent information in a manner which satis®es the
istics at each life-cycle stage. A brief discussion is presented in concepts of comparability and understandability,
Section 6.1. achieved by appropriate levels of aggregation and
Table 1
Organizational characteristics across life-cycle stages
Characteristics Birth Growth Maturity Revival Decline

a
Strategy
Mission Selective build Aggressive build Hold/harvest Aggressive build Hold/divest
Level of service/product Considerable Incremental Low Substantial Low
innovation
Scope of product/market Narrow Broad Consolidated Diversi®ed Consolidated
Structureb
Structuring of activities Informal and Moderately formal Formal and Formal and highly Very formal and
undierentiated and dierentiated moderately dierentiated moderately
dierentiated dierentiated
Concentration of authority Highly decentralized Decentralized Moderately Decentralized for Moderately
decentralized divisional decisions decentralized
but highly centralized
for overall strategy
making
Leadership stylec
Initiation of structure High Medium Medium High Medium
Consideration Low High Medium Medium Low
Decision-making styled Decisive Integrative Hierarchical Flexible Decisive

Amount of information used Minimum Maximum Maximum Minimum Minimum
Degree of focus in use of data Single solution Multiple solutions Single solution Multiple solutions Single solution
a
A pattern in a stream of decisions (Mintzberg, 1978).
b
Any formalized, routine, standardized, and ocially sanctioned process, through which the organization is administered (Hall,
1972).
c
The instrumental or task aspects and the socio-emotional aspects of managerial behavior (Hopwood, 1973) (e.g. Fleishman, 1957;
Stogdill, 1963).
d
Cognitive make-up of decision-makers (Dermer, 1973) (e.g. Driver and Mock, 1975).
Fig. 1. A research framework for MAS design Ð a life-cycle perspective.

integration, and breadth of scope. SAC 3 also (Miller & Friesen, 1984). The control processes
suggests that timeliness of information is one of the must be suciently ¯exible to cope with transi-
constraints on relevant and reliable information. tional changes and facilitate varied management
This element has been analyzed as part of the form competence and skills for organizational environ-
dimension (presentation of information) in prior ment adaptation (Berry, Loughton & Otley, 1991).
studies as frequency and speed of reporting It is therefore expected that MAS, which are part
(Chenhall & Morris, 1986; Gul, 1991; Mia & of the control processes, will be dierent at each
Goyal, 1991). Application of the dimensions as stage in order to be internally consistent with the
suggested in SAC 3 to the current study provides a respective life-cycle con®guration.
coherent set of operational measurements for Using the Miller and Friesen's (1983, 1984) ®ve-
MAS. stage life-cycle model, Birth, Growth, Maturity,
To be consistent with Miller and Friesen's (1983, Revival and Decline, two main hypotheses were
1984) studies, Organizational life-cycle con®gurations developed to address the research questions. The
are conceptualized as distinctive patterns of organi- ®rst hypothesis addresses dierences across life-
zational characteristics including strategy, struc- cycle stages and seeks to identify a pattern in
ture, leadership and decision-making styles at each terms of varying levels of MAS formality. The
stage. Achieving an internally consistent pattern second hypothesis examines the nature of dierent
of organizational characteristics enhances perfor- levels of formality in terms of the (1) selection and
mance (Van de Ven & Drazin, 1985). (2) presentation of management accounting infor-
The proposed framework addresses the prob- mation.
lems raised by Miller (1981). To minimize speci®-
cation errors, the scope of this study has been 4.1. Pattern of change in MAS across stages
broadened by simultaneously examining possible
key variables the characteristics of which portray Prior research suggests that as ®rms progress
dierent life-cycle con®gurations. To avoid over- from birth to later stages, management require-
generalization, a sample of ®rms is segmented in ments for information and control accelerate due
terms of life-cycle stages. Taxonomies are devel- to increased structural and environmental com-
oped, which provide distinctions between dierent plexity (Gupta & Chin, 1990; Miller & Friesen,
types of organizations at each life-cycle stage, and 1983; Simons, 1995, 1999). As such, we expect
consider simultaneous relationships among the each life-cycle con®guration to be associated with
variables within each type. The following section dierent MAS designs. Prior studies also found
presents the development of the hypotheses to be that ®rms gradually and steadily increase their
tested. information processing and decision-making
sophistication over successively more complex
stages of the life-cycle when ®rms' product/market
4. Hypotheses development heterogeneity intensi®es and structures become
more decentralized (Amat et al., 1994; Dent, 1987;
A central issue emerges from the foregoing dis- Gul, 1991; Gupta & Chin, 1990, 1993; Hoque &
cussion that MAS, as part of an organizational Hopper, 1994; Kimberley, 1980; Miller & Friesen,
control package, is a tool for management decision- 1980a, 1983; Simons, 1995, 1999; Smith et al.,
making. It is expected that organizations will 1985). These changes generally re¯ect a pattern of
change their MAS design to be internally con- linear progression of information processing and
sistent with dierent con®gurations of organiza- decision-making sophistication over successively
tional characteristics across life-cycle stages. While more complex stages up until and including the
the time-span for each life-cycle stage is dierent revival stage, but which regresses thereafter during
from ®rm to ®rm, each of the stages is unique in the decline stage (Miller & Friesen, 1983).
showing integral interdependencies among strategy, However, for the more speci®c question of MAS
structure, leadership and decision-making variables design, these diering organizational characteristics
across the stages suggest a more de®nite pattern of formality again suggests that growth stage ®rms
progression, albeit one that grows from birth and with medium initiation of structure and high con-
regresses during decline stages (Table 1). In parti- sideration will dominate the medium/medium fea-
cular, the decision-making style characteristics at tures of mature ®rms. Furthermore, the high
each stage become especially salient if we wish to initiation of structure and medium consideration
ensure the decision relevance of MAS. The amount of revival ®rms reinforces the view the MAS
and focus of information9 used by decision-makers formality of revival ®rms will exceed that of
at each stage convey direct messages for MAS mature ®rms. Finally, leadership style suggests
design in terms of not only the information selected, that the information needs of birth ®rms will
but also how that information needs to be pre- exceed those of declining ®rms.
sented to enhance relevance in the speci®c context. Based on the foregoing discussion the expected
That is, we expect MAS formality (selection and pattern of change in MAS formality is captured in
presentation of information) to be signi®cantly Hypothesis 1.
in¯uenced by the varying demands of decision-
making styles. H1: MAS formality (in terms of selection and
The selection and subsequent presentation of presentation of information) across organiza-
management accounting information to facilitate tional life-cycle stages will increase from birth
the maximum use of information within a multi- to growth, relax at maturity, and increase
ple-solution focus suggests that MAS needs to slightly at revival before decreasing during
re¯ect the highest levels of formality at the growth decline.
stage and be the least formal at the birth stage. To
the extent that the need to support a multiple-
solution focus will dominate the need to supply a 4.2. Nature of dierences in MAS attributes
maximum amount of information, the decision- across life-cycle stages
making style would indicate that the formality of
MAS at revival will slightly exceed that at maturity Based on the proposed pattern of change in
but will drop at the decline stage. MAS formality across life-cycle stages, MAS dif-
The other organizational characteristics at each ferences manifest in terms of selection and pre-
stage tend to reinforce this hypothesized pattern of sentation attributes. Highly formalized MAS do
MAS formality. For example, aggressive build make available a variety of tools to be selected by
strategies of growth and revival ®rms demand the management, ranging from traditional ®nancial
supply of more and diverse information than the reporting to cost accounting, budgeting, responsi-
hold/harvest strategies and hold/divest of mature bility accounting, quality controls and environ-
and decline ®rms respectively. Minimum amounts mental scanning (Miller & Friesen, 1983). Such
of information and single focus solutions dom- sophisticated systems present information re¯ecting
inate the selective build strategies of birth ®rms. high levels of aggregation and integration, broad
The structural characteristics tend to suggest that scope, and ensure timely reporting (Chenhall &
formality, dierentiation and decentralization will Morris, 1986; Gul, 1991). The following hypotheses
largely imply that MAS of birth ®rms will be the suggest how these speci®c attributes change across
least formal among ®rms all at other stages. The stages, drawing upon evidence appropriate to each
comparative impact of leadership styles on MAS stage.
9
These are the two dimensions of information processing as 4.2.1. Selection of information
suggested by the Driver and Lintott's (1972) Decision Style Evidence suggests that ®rms' strategic missions,
Theory. Later, Driver and Mock (1975) developed four basic
structural characteristics, leadership and decision-
decision styles, Decisive (minimal information used, single
focus), Flexible (minimal information used, multiple focus), making styles do aect what information will be
Hierarchic (maximum information used, single focus), Inte- deemed relevant and reliable for managers (Driver
grative (maximum information user, multiple focus). & Mock, 1975; Govindarajan & Gupta, 1985;
Hopwood, 1974; Khandwalla, 1972; Merchant, increasingly functional-based and divisionalized

1997). Accordingly, with systematic dierences structures, while cash-¯ow statements and capital
between these organizational characteristics across budgeting are important for monitoring ®nancial
life-cycle stages, we expect to observe dierences resources for expanding activities. To facilitate
in the information selected for reporting within an growth ®rms adapting to the more diverse and
organization's MAS giving rise to varying levels of competitive situation, managers rely heavily on
formality. In particular, ®rms will rely upon dif- environmental scanning and quality controls
ferent amounts of information by their selection of (Miller & Friesen, 1984).
various ranges of management accounting tools. Consistent with their emphasis upon eciency
Birth stage ®rms are usually characterized as and pro®tability, Mature ®rms seek to stabilize
small, centralized as well as owner-controlled. their operations by strategies that replace innovation
They have been found to rely most heavily upon with consolidation. Due to stability of operations,
informal controls that exemplify an interpersonal structures remain fairly centralized with decision-
control strategy (Bruns & Waterhouse, 1975; making power dominated by a few key managers
Gupta & Chin, 1990; Simons, 1995, 1999). Asso- (Miller & Friesen, 1983, 1984). Under such hier-
ciated with the simple structure with short span of archical structures with broad spans of control
control, only a minimal amount of information is and elaborate procedures, increased amounts of
used for decision-making (Driver & Mock, 1975). information will be selected for decision making
What formal control systems they do use tend to (Driver & Mock, 1975). More emphasis on formal
be based on simple and narrowly-de®ned measures controls in achieving operational eciency is also
(e.g. variances from standard costs). As such MAS expected along with the reliance on quality con-
of birth ®rms are expected to be least formal in trols and environmental scanning for management
selection of information. The only formal systems of mature ®rms (Gupta & Chin, 1990; Miller &
they require are internal accounting controls to Friesen, 1983, 1984). Mature ®rms, because of
ensure that assets are secure and accounting their more limited focus, are expected to rely on a
information is reliable (Simons, 1995). slightly narrower range of tools for supplying
With the expansion of activities and products, information as those at the growth stage.
together with increasingly decentralized structures, As stability is superseded by poor performance,
®rms at the Growth stage have to rely on formal ®rms need to revive. To achieve the turnaround,
rules and procedures for action accountability ®rms at the Revival stage focus their strategies on
purposes to ensure organizational and adminis- diversi®cation and expansion of product-market
trative eciency (Katz & Kahn, 1978; Merchant, scope. Structures become highly divisionalized in
1997; Walsh & Dewar, 1987). In addition, formal order to cope with the increasingly heterogeneous
measurable goals and monitoring participants' market. While authority over operating decisions is
activities have at this stage become important vested within divisions, the power for overall strategy
(Simons, 1995). As a result, managers at the making is still highly centralized. Associated with
growth stage devote greater eort to collecting speed, adaptability, and intuition as required in revi-
and processing information on their more diverse val ®rms, decision-making styles tend to be ¯exible,
and competitive environment. Decision-making using minimal data for loose and ¯uid pattern of
tends to focus on a broad array of factors, control (Driver & Mock, 1975). MAS are thus
demanding a larger amount of information than expected to supply relevant information about divi-
during birth stages (Driver & Mock, 1975; Miller sional operations that allow management to guide
& Friesen, 1984). MAS for growth ®rms are corporate strategies. These include, approving
expected to provide more formal tools covering a capital expenditure and deciding upon the ®rms'
wider range than at other stages. In particular, business portfolios (Miller & Friesen, 1984).
diagnostic control emerges at the growth stage Accordingly, revival ®rms are expected to rely on
(Simons, 1995). Participative budgeting and a narrower range of formal tools for supplying
responsibility accounting become essential for the information than that of previous two stages.
Firms at the Decline stage are characterized by Firms at the Birth stage are expected to present
pro®t reduction and scarcer ®nancial resources information in the least aggregated and integrated
than in any other stages. No clear-cut strategy manner. This is due to their homogenous product/
prevails. There is a tendency towards an `ìnternal market, simple and highly centralized structures,
orientation'' where owners/managers or boards of and the intuitive decision-making style. Narrow
directors become more concerned with the necessity scope of information will be sucient for the simple
to preserve resources rather than with customers' administrative tasks and focused decision-making.
preferences. Locus of control is at the top level of With increasingly heterogeneous products/markets
management which may rely on a minimal amount correlated with size, decentralized structures and
of information for decision-making (Driver & analytical decision-making style at the Growth
Mock, 1975). Accordingly, information-processing stage, ®rms will present information in a more
mechanisms are expected to become less formal than aggregated and integrated manner than that at the
those of previous stages by relying upon a narrower birth stage. The scope of information has to be
range of management accounting tools (Miller broadened in order to deal with the diversity of
and Friesen, 1984). decisions associated with decentralized and divi-
By relying upon dierent amounts of informa- sionalized structures. As Mature ®rms' activities
tion through their selection of various ranges of become rather stagnant, their structures begin to
management accounting tools, ®rms aect the centralize and managers adopt a somewhat intui-
formality of their MAS. In particular, ®rms at the tive decision-making style. Within the context of
growth and maturity stages will select the broadest the changes, information presented is expected to be
range of management accounting tools while those less aggregated and less integrated, and of narrower
at birth, revival and decline will select narrower scope than that for growth stage ®rms. At the
ranges of such formal tools. Speci®cally, the fore- Revival stage, ®rms have similar internal char-
going discussion is captured in the following acteristics as at the growth stage, and accordingly
hypothesis. are expected to have similar levels of aggregation,
integration and scope in their presentation of
H2 (a): In terms of selection of information, information. As ®rms Decline, their markets
®rms at the growth and maturity stages will shrink, structures become highly-centralized and
rely on a broader range of managing managers have little time for analysis of their
accounting tools than ®rms at birth, revival decisions. Accordingly, information presented is
and decline stages. much less aggregated and integrated, and of nar-
rower scope than the previous stages.
Timeliness of information is somewhat dierent
4.2.2. Presentation of information from other elements in presentation as it is aected
It has been found that MAS present informa- more so by factors external to the organizations
tion at dierent levels of aggregation, integration, (environmental uncertainty) rather than by inter-
scope and timeliness, depending on strategies, nal factors such as strategy, structure, leadership
structures and management styles (Abernethy & and decision-making styles (Chenhall & Morris,
Guthrie, 1994; Chenhall & Morris, 1986; Gul, 1986; Mia & Chenhall, 1994; Mia & Goyal, 1991).
1991; Gul & Chia, 1994; Mia & Chenhall, 1994; However, life-cycle researchers have found that
Mia & Goyal, 1991; Miller & Friesen, 1984). environmental uncertainty does vary across life-
Accordingly, with systematic dierences between cycle stages (Gupta & Chin, 1993; Miller & Friesen,
these organizational characteristics across life- 1984; Kimberley & Miles, 1980; Smith et al.,
cycle stages, there will be dierences in the pres- 1985). Birth ®rms typically operate in homo-
entation of information that re¯ect varying geneous and placid environments (relatively low
degrees of MAS formality. In particular, the uncertainty) that become more heterogeneous and
degree of focus on information used will have competitive (high uncertainty) when ®rms Grow
implications on how information is presented. and Mature through to the Revival stage. Decline
®rms tend to enact a more homogeneous environ- Queensland. Furthermore, the overall environ-
ment by refocussing their activities. Consequently, mental conditions within which clothing and
it is expected that increased levels of environ- footwear businesses are operated are homo-
mental uncertainty at the growth and revival geneous in terms of environmental uncertainty,
stages will require more timely reporting of infor- level of competition and implications of ®scal
mation. policies.
The nature of all these dierences in presenta- Data were collected concurrently by mail survey
tion of information across life-cycle stages is cap- and ®eld studies (including personal interviews
tured in the following hypothesis. and documentary evidence). Questionnaires were
sent to the chief executive ocers (CEOs) of busi-
H2(b): In terms of presentation of informa- nesses mainly in New South Wales, Queensland
tion, the levels of aggregation and integration and Victoria, targeting approximately over 600
will be higher, and the scope will be broader establishments. These areas represent locations of
at the growth and revival stages than at other the largest (over 100 employees) and smallest
stages. Firms at the growth and revival stages (below 20 employees) establishments. The sample
will require timely information more than was randomly selected from the Yellow Pages of
®rms at other life-cycle stages. the relevant telephone directories.
Field studies were conducted by means of semi-
In summary, the combination of the amount structured personal interviews with CEOs of two
and focus of management accounting information or three ®rms from each life-cycle stage, together
selected and presented at various organizational with the collection of documentary evidence. The
life-cycle stages aggregate to dierent levels of objective of the interviews was to explore how
MAS formality. The pattern of change of this ®rms at dierent organizational life-cycle stages
formality has been presented as Hypothesis 1. The use MAS in their transitional adaptation. The
extent of management accounting information selection of sample ®rms was based on the two
selected and the form of its presentation behind most common organizational life-cycle indicators:
this pattern have been indicated in Hypotheses age (years of operation) and size (number of
2 (a) and (b). The exploratory nature of this study employees).10 Judgmental or purposive sampling
limits the speci®city of the ®ndings, but it is hoped was employed to select 10 ®rms for personal
that they will ®ll a gap in the management interviews. The CEOs were chosen for interviews
accounting literature where evidence of MAS as they are more familiar with the overall opera-
attributes across life-cycle stages has been scarcely tion of their businesses and are involved with
documented. strategic decision-making and execution of corpor-
ate policies. They have signi®cant in¯uences on
how MAS are designed in order to help them in
5. Method discharging their managerial functions. In parti-
cular, those CEOs who were also founders of the
To explore the hypotheses, a single industry was businesses, were able to provide oral histories of
selected in order to minimize environmental het- their ®rms' growth and development, and explain
erogeneity (Dess & Davis, 1980). The clothing and why and how MAS evolved across life-cycle
footwear Industry in Australia was selected as the stages.
research sample as it is large in size and diverse in The interviews took place at the premises of the
nature, covering a number of varying activities, participating ®rms for approximately 1 hour for each
ranging from pure manufacturing to ®nal retail case. During the ®rst part of the interviews, CEOs
outlets. Such diversity indicates a great variation
in organizational design, including MAS. Geo- 10
Age and size were the only two life-cycle indicators for
graphically, ®rms in the industry are located which data were readily available before administering the
mainly in Victoria, New South Wales and questionnaires and data analysis.
were asked some open-ended questions, such as seven-point Likert scale, indicating the extent of
the nature of business, the history of the ®rm since impact of the board of directors, owners/share-
establishment, their educational background and holders and customers on the decisions and opera-
working experience, together with their employ- tions of the ®rm. The latter sections contained
ment history with the respective ®rms. The second questions measuring organizational life-cycle, MAS
part of the interviews proceeded by requesting and organizational eectiveness.
CEOs to respond to the questionnaire. After the The Miller and Friesen (1983, 1984) and Hop-
CEOs had replied to issues in each section, they wood (1973) instruments were adapted to measure
were asked whether any signi®cant changes took organizational life-cycle variables on a seven-point
place in the past and the rationale for such events. Likert scale (1=Not used at all, 7=Used to a
Where there were changes in MAS, further infor- great extent). Seventeen questions measured the
mation was elicited to explore whether there were extent to which certain strategies were pursued by
associated changes in other variables, such as the respondent ®rms. These included product/service
strategy, structure or CEOs themselves; how innovations, company expansion, marketing and
senior management respond to changes in organi- liaison with governments. Structure was measured
zational factors through reliance on MAS; and by ®ve questions in terms of authority and activities.
whether organizational eectiveness had been Authority structure referred to the degree of
improved arising from any changes in MAS. decentralization with activity structure as the
Documentary and anecdotal evidence collected degree of specialization and dierentiation. Leader-
during the interviews include: corporate mission ship style was measured by twenty questions.
statements, organizational charts, annual reports, Respondents were asked to indicate the extent to
business plans, operating manuals or ¯ow charts which they were demanding and speci®c in de®ning
relating to MAS and relevant media clippings. In duties to their subordinates, or how trusting,
addition, industry statistics and information were friendly and respectful they were toward their
obtained from government agencies and trade subordinates. Decision-making style was measured
associations (such as the Council of Textile and by nine questions. Respondents were asked to
Fashion Industries of Australia Limited). This state the amount of information used and the
provided details of the contextual conditions in degree of focus when making decisions.
which the clothing and footwear businesses are The MAS attributes section contained a general
operated. question on the extent to which MAS would be
computerized, and 27 questions on the two main
5.1. Measurement instruments11 dimensions Ð selection and presentation of
information Ð being measured. The instruments
Survey responses were sought on seven-point developed by Khandwalla (1972) and Chenhall and
Likert scales except for some open-ended ques- Morris (1986) were adapted for this study. MAS
tions. The ®rst section of the questionnaire cov- formality in terms of selection and presentation
ered the pro®le of each ®rm based on its nature of dimensions were measured on a seven-point Likert
business, age, size and ownership structure. All the scale (1=Not used at all, 7=Used to a great
questions in this section were open-ended except extent). The selection dimension (13 questions)
for those relating to ownership structure. These was evaluated by the extent to which a variety of
characteristics are general indicators of the ®nancial and management control tools would be
respondent ®rm's relative life-cycle stage. Age was used. The presentation dimension (14 questions)
measured by the number of years in operation and was measured as the extent to which information
size by the number of both full-time and part-time would be presented in terms of aggregation, inte-
employees. Ownership structure was measured on a gration, scope and timeliness of information.
The last section of the questionnaire (nine ques-
11
Copies of the complete questionnaire are available from tions) contained respondents' self-reported measures
the authors. of organizational eectiveness of their respective
®rms. Organizational eectiveness was operationally between consecutive stages by Mann±Whitney

measured by multiple measures of ®nancial perfor- U-tests.
mance. Based on the recommendations of State-
ments on Management Accounting 4D (1986) 6.1. Classi®cation of ®rms into life-cycle stages
``Practices and Techniques: Measuring Entity Per-
formance'', dierent performance measures were The main thrust of this study is to explore whe-
adopted at each life-cycle stage. To identify the ther MAS attributes dier across organizational
actual salient criteria for performance evaluation life-cycle stages. To this end, it is essential to classify
at each life-cycle stage, respondents were asked to respondent ®rms into their respective life-cycle
rate the extent to which they use each of the mea- stages ®rst and then to analyze the MAS attributes
sures (sales growth rate, operating cash ¯ows, at each stage. The ®rst phase of analysis involved
ROI/ROA and pre-tax net pro®t to sales) and to classifying ®rms into groups with relatively homo-
self-rate their ®rm's current performance (in terms geneous organizational characteristics. These charac-
of the four measures) as compared with the teristics are expected to be signi®cantly dierent
industry average. Respondent ®rms were also between groups, representing various life-cycle
requested to indicate their reported sales growth con®gurations.
rates for the past 3 years. As performance is one of Classi®cation of ®rms into life-cycle stages was
the life-cycle indicators (Miller & Friesen, 1984), based on cluster analysis results. To reduce the
data obtained from this section was to help classify life-cycle variables to a manageable set of data,
®rms into dierent life-cycle stages. factor analysis (varimax principal component
analysis) was initially conducted. This procedure
resulted in four factors for ®rm strategy, two each
6. Data analysis for structure, leadership and decision-making
styles.14 These factor scores were used in cluster
A total of 49 useable responses to questionnaires analyses to classify ®rms into organizational life-
distributed by mail survey and ®eld study visits were cycle stages. Cluster analysis was performed using
received.12 For the purpose of testing the hypoth- the hierarchical agglomerative technique with
eses, two main steps were involved in analysis of Ward's minimum variance method for distance
quantitative data:13 ®rst, classifying respondent measure between two sub-groups. To be con-
®rms into organizational life-cycle stages by cluster sistent with the Miller and Friesen's (1983, 1984)
analysis; second, comparing MAS attributes across ®ve-stage life-cycle model, respondent ®rms were
life-cycle stages by Kruskal±Wallis tests and classi®ed into ®ve clusters (representing ®ve
12
This represents a response rate of 14.5%. While this low that this pro®le does seem to describe a particular sub-group
response rate is adequate for the purposes of data analysis in an of ®rms.
16
exploratory study such as this, it is disappointing and could Signi®cance tests on variables used to create clusters are
aect how well the respondent ®rms represent the population inappropriate statistically for validation purposes. According to
of interest. Non-response bias too could also aect the analysis. Aldenderfer and Blash®eld (1984), cluster analysis, by de®nition,
To examine whether a non-response bias was present, the ®rst will separate entities into distinctive groups that have no overlap
20% of the replies were compared with the last 20%. t-Tests along the variables being used to create the clusters. Signi®cant
were performed on the life-cycle indicators (strategy, structure, tests for dierences between clusters along these variables should
leadership and decision-making styles) as they represent key always reveal signi®cant dierences. Performance of these tests is
characteristics of the entire sample. No signi®cant dierences therefore meaningless. The preferred method of validation is to
were found suggesting the absence of non-response bias. perform signi®cance tests on variables not used to generate the
13
The program used for data analysis is the Statistical cluster solutions. The power of this external validation is that it
Package for Social Sciences (SPSS). directly tests the generality of a cluster solution against relevant
14
The results of factor analysis are available on request. criteria (Aldenderfer and Blash®eld, 1984). For cluster validation
15
The small n included in Cluster ®ve may be dismissed purposes to test whether signi®cant dierences exist across clus-
as an outlier (Everitt, 1993). However, several dierent ters, Kruskal±Wallis tests are sucient as they are analogous to
clustering procedures yielded this similar cluster, suggesting the parametric test of one-way analysis of variance.
stages). As a result of the clustering procedures, 15%, with functionally organized structures, and
four ®rms were categorized in Cluster One, nine in early formalization of policies. Firms with sales
Cluster Two, 29 in Cluster Three, ®ve in Cluster growth rates less than 15% and more bureaucratic
Four and two in Cluster Five.15 organization were classi®ed as at the maturity
To validate the cluster solution obtained in this stage. Revival ®rms were those with sales growth
study, signi®cance tests using the Kruskal±Wallis greater than 15%, diversi®cation of product lines,
test were performed on variables not used for the divisionalization, use of sophisticated controls and
cluster analysis.16 The external variables selected planning systems. Firms at the decline stage were
were age, sales growth rates and performance those where demand for products had leveled o,
weighted scores (including pre-tax pro®t to sales, low rate of product innovation, and where pro®t-
operating cash-¯ow to sales and return on invest- ability had started to fall. These criteria are sum-
ment) which have been regarded as some of the marized in Table 3.
signi®cant criteria (other than strategic, structural A review of age, performance weighted scores
and managerial characteristics) in distinguishing and sales growth rates (Table 2, Panel A) provides
®rms at dierent phases of development (Adizes, bases for preliminary labeling of the clusters. Prior
1979; Greiner, 1972; Gupta & Chin, 1990; Miller life-cycle studies have also used age as one of the
& Friesen, 1983, 1984; Scott, 1971; Smith et al., common life-cycle indicators (Gupta & Chin,
1985). Table 2 (Panel A) presents the descriptive 1993; Miller & Friesen, 1983, 1984; Quinn &
statistics of age, average performance weighted Cameron, 1983; Smith et al., 1985). Evidence sug-
scores and average sales growth rates for cases gests that ®rms at initial stages are typically
within each of these clusters, together with the younger than those at later stages. As shown in
results of Kruskal±Wallis tests. Evidence indicates Table 2 (Panel A), Cluster One has the shortest
signi®cant dierences for age and average perfor- (13) years of operation but more than 10-years-
mance weighted scores between clusters, suggest- old, suggesting the possibility of the Growth stage
ing a heterogeneous cluster solution.17 based on the criteria stated. As there is no clear-
After validity of the cluster analysis was estab- cut distinction in terms of age among the later life-
lished, the next step involved labeling the clusters cycle stages, Clusters Two, Three and Four cannot
with the relevant life-cycle stage. Labeling of clus- be easily labeled. However, with their long history,
ters was performed by comparing the character- these clusters may represent ®rms at Maturity,
istics of each cluster with a priori theory. Miller Revival and Decline stages. The median age for
and Friesen's (1983, 1984) studies used a set of Cluster Five cannot be statistically identi®ed and
life-cycle classi®cation criteria18 that were based no label can be assigned accordingly.
on organizational characteristics (strategy, struc- In terms of performance weighted scores, both
ture, leadership and decision-making styles) as Clusters One and Four reveal signi®cantly higher
identi®ed in the literature. Birth ®rms were less performance than the other three clusters. Better
than 10 years old, with informal structures, and performance suggests the success enjoyed by
dominated by owner managers. Growth ®rms expansion of the product-market scope in ®rms at
were those with sales growth rates greater than either the Growth or Revival stage. Cluster Three
has an average performance weighted score which
17
implies a slackening of organizational eectiveness,
Internal validation of cluster solutions was also performed
by using multiple discriminant analysis on life-cycle factor
which is typical in ®rms at the Maturity stage. Both
variables. Results show that six of the indicators have played a Clusters Two and Five have performance weighted
signi®cant role in classifying the ®rms into their respective scores below average, indicating poor performance
stages 93.88% of the time. Thus, the cluster solution was, either due to ``much struggling'' in Birth ®rms, or
therefore, regarded as valid. `èxternal challenges and lack of innovation'' at
18
Miller and Friesen (1984) used raters to assign ®rms to
dierent stages of the life cycle based on these criteria. Inter-
the Decline stage (Miller & Friesen, 1984).
rater reliability was relatively high, as indicated by the Spear- Analysis of the sales growth rates suggests
man coecient of 0.86 between assignments. Cluster One has the highest rate (over 15%) as
Table 2
Pro®le of organizational characteristics across life-cycle stagesaf
Entire Stages of organizational life-cyclee Kruskal±Wallis

sample Test
(n=49) Birth Growth Maturity Revival Decline Chi-square
(Cluster Five) (Cluster One) (Cluster Three) (Cluster Four) (Cluster Two) d.f.=4
(n=2) (n=4) (n=29) (n=5) (n=9)
Panel A
Performance
Performance weighted 2.89 (1.69) 2.07 (±) 4.26 (2.17) 2.75 (1.16) 4.50 (2.64) 2.07 (2.18) 10.25*
scoresb
Average sales 0.10 (0.15) ± (±)d 0.18 (0.25) 0.14 (0.14) 0.05 (0.58) 0.03 (0.27) 6.91
growth ratec
Demographic pro®le
Age in years 30 (31.14) ± (±)d 13 (6.70) 35 (29.58) 30 (43.18) 35 (32.08) 10.29**
No. of employees 23 (69) 2 (±) 61 (36.50) 27 (85.75) 23 (60.25) 16 (76.00) 7.20
Panel B
Life-cycle indicators
Strategy
Product-market related 4.64 (1.45) 4.30 (±) 5.77 (1.35) 4.66 (1.14) 4.67 (2.15) 3.35 (1.09) 15.25**
strategies
Diversi®cation, marketing 1.92 (1.72) 2.67 (±) 3.03 (3.94) 1.86 (1.29) 1.61 (3.09) 2.21 (1.98) 1.54
and distribution
Strategic positioning 2.33 (1.33) 1.77 (±) 1.47 (2.07) 2.33 (1.26) 3.67 (2.81) 2.31 (1.28) 6.36
Company expansion 2.26 (1.27) 2.11 (±) 4.18 (1.89) 2.01 (1.34) 1.72 (1.14) 2.58 (2.22) 7.90
Structure
Decentralization of 4.05 (2.03) 3.50 (±) 5.29 (1.94) 4.05 (1.36) 5.00 (1.76) 2.47 (2.53) 15.45**
authority
Structure of activity 3.44 (1.80) 2.27 (±) 3.61 (2.09) 3.32 (1.10) 5.06 (0.48) 2.70 (1.99) 12.43*
Leadership style
Consideration 5.02 (0.99) 3.32 (±) 6.51 (0.92) 4.84 (0.58) 6.32 (0.81) 5.02 (1.06) 22.04***
Initiation of structure 4.76 (1.12) 6.35 (±) 6.26 (1.13) 4.63 (0.85) 5.10 (0.94) 4.48 (0.65) 18.36***
Decision-making style
Multiplexity of decisions 5.31 (1.59) 2.66 (±) 6.55 (0.98) 5.40 (0.90) 5.49 (1.43) 3.49 (2.14) 23.93***
Amount of data used 4.91 (1.28) 5.72 (±) 6.13 (1.00) 4.72 (0.93) 6.18 (0.61) 4.25 (1.38) 22.24***
a
Panel A reports the results of validation of the cluster solution before the clusters are labeled. Clusters One±Five were subsequently
labeled as Growth, Decline, Maturity, Revival and Birth stages, respectively. Panel B reports the medians, inter-quartile ranges (IR), and
the results of the Kruskal±Wallis tests performed on the weighted factor scale scores of the life-cycle variables.
b
Organizational performance was measured by requesting each ®rm to rate (a) its comparative performance on operating cash-¯ows,
sales growth rates, pro®t margins, and ROI (1=``Below industry average'' and 7=`Àbove industry average'') and to rate (b) the extent to
which it uses measures of these performance indicators (1=``Not used at all'' and 7=`Ùsed to a great extent''). This latter rating proxies
for the relative importance the ®rm attaches to these performance measures. The performance weighted score for each ®rm as derived by
multiplying (a) by (b) for each of the four measures. A single performance weighted score for each ®rm was then calculated by taking
weighted average of these scores of four measures. The ®nal performance weighted score for each stage was then the simple average of the
weighted scores of all ®rms in the stage.
c
Respondent ®rms were requested to indicate their reported sales growth rates for the past 3 years. The table presents the median of the
average sales growth rates of 3 years for each cluster.
d
The medians are not de®ned.
e
Life-cycle variables were measured on a seven-point Likert scale (1=Not used at all, 7=Used to a great extent). Seventeen questions
measured the extent to which certain strategies were pursued by the respondent ®rms. These included product/service innovations, com-
pany expansion, marketing and liaison with governments. Structure was measured by ®ve questions in terms of authority and activities.
Authority structure referred to the degree of decentralization with activity structure as the degree of specialization and dierentiation.
Leadership style was measured by 20 questions. Respondents were asked to indicate the extent to which they were demanding and speci®c
in de®ning duties to their subordinates, or how trusting, friendly and respectful they were toward their subordinates. Decision-making
style was measured by nine questions. Respondents were asked to state the amount of information used and the degree of focus when
making decisions.
f
*P<0.05; **P<0.01; ***P<0.001.
Table 3
Preliminary labels of clustersa
Basis of labelling Clusters
One Two Three Four Five
Age in years Growth Maturity/Revival/ Maturity/Revival/ Maturity/Revival/ ?

Decline Decline Decline
Performance weighted scores Growth/Revival Decline/Birth Maturity Revival/Growth Birth/Decline
Sales growth rates Growth/Revival Decline Maturity/Birth Maturity/Birth ?
Preliminary labeling Growth Decline Maturity Revival Birthb
a
The preliminary labeling was based on the Miller and Friesen's (1983, 1984) classi®cation criteria for life-cycle stages: Birth, ®rm
is less than 10-years-old, has informal structure, and is dominated by owner manager; Growth, sales growth greater than 15% per
annum, functionally organized structure, early formalization of policies; Maturity, sales growth less than 15% per annum, more
bureaucratic organization; Revival, sales growth greater than 15% per annum, diversi®cation of product-lines, divisionalization, use
of sophisticated controls and planning systems; Decline, demand for products levels o, low rate of product innovation, pro®tability
starts to drop o.
b
The mean value of the age of this cluster is 8 years. This satis®es the criteria as set above. Field data also support that one of the
®rms fall in this cluster was at the Birth stage.
expected in ®rms at Growth and Revival stages due Firms in Cluster One are characterized by an
to expansion of product-market scope. Clusters emphasis on product-market related strategies and
Three and Four have sales growth rates less than company expansion. Much eort is devoted to
15%, indicating either stability in activities as product innovation and market segmentation.
®rms at the Maturity stage or Birth ®rms attempting Attempts at diversi®cation by setting up new
to become a viable entity. Cluster Two has the departments or subsidiaries are part of the strategies
negative rate of sales growth, suggesting stagnation for company expansion. Structures are decentral-
as markets dry up and ®rms begin to Decline (Miller ized and moderately dierentiated, which allow
& Friesen, 1984). Cluster Five has no reported participative management and departmentalization
median on sales growth rates and thus cannot be for complex operational and strategic activities
identi®ed. Table 3 provides the preliminary labels of (Adizes, 1979; Miller & Friesen, 1984). Leadership
clusters based on age in years of operation, perfor- style is of high consideration and moderate initiating
mance weighted scores and sales growth rates. of structures, indicating a personal and ¯exible
To con®rm these preliminary labels of the ®ve approach to management, which is neither budget-
clusters, the organizational characteristics (strategy, constrained nor pro®t-conscious (Hopwood,
structure, leadership and decision-making styles) of 1974). This leadership style is consistent with the
each cluster were compared with that as suggested characteristics of Adizes' (1979) go-go stage.
in the Miller & Friesen's (1983, 1984) life-cycle Decision-making is multiplex and requires a
model as shown in Table 1. Kruskal±Wallis tests large amount of data. This suggests an inte-
were performed on the scale scores19 of each of grative style which involves deliberation and dis-
these variables. Table 2 (Panel B) presents the cussion by various managers (Driver & Mock,
results, showing seven out of these life-cycle factor 1975; Miller & Friesen, 1984). In addition to the
variables are signi®cantly dierent across clusters. high sales growth rate and performance, the
The results suggest these variables as eective relatively short history of operation, the character-
indicators in classifying ®rms into clusters. istics discussed above resemble that of Growth
stage ®rms.
19
This was calculated by multiplying the factor loading of
Cluster Two represents a sub-group of ®rms
each variable with its raw scores and then ®nding the weighted which ``just muddle through'' without any clear
means of all the variables loading on the same factor. product-market strategy and showing a general
lack of strategic planning. This is indicated by the expected of the Maturity stage ®rms, which
relatively low median values of all the strategy have relatively lower growth rates and perfor-
factors. In particular, the emphasis on product mance, together with a long history of opera-
innovation is the lowest of all the stages. Struc- tion.
tures are highly centralized with a locus of control The ®rms as classi®ed in Cluster Four focus
vested in top management. The moderately dier- extensively on product-market strategies, includ-
entiated structures are appropriate to a rather ing major and frequent product innovation and
narrow product/market scope due to stagnation of market segmentation. Among all groups, ®rms in
activities (Miller & Friesen, 1984). The leadership Cluster Four tend to devote the highest eort to
style is of moderate consideration and initiation of strategic positioning. This may include their
structure. This style implies a fairly impersonal attempts in improving eciency and lobbying
and bureaucratic management approach which is governments. The low score reported in company
inclined to be more concerned with achieving expansion seems to be inconsistent with the sales
budgets and pro®tability than as shown in Cluster growth rate. It may suggest that ®rms in this clus-
One (Hopwood, 1974; Miller & Friesen, 1984). ter tend to avoid expansion on any large scale
The decision-making style is not distinct, showing until they have strengthened their position. Struc-
a moderate level of multiplexity and fair amount tures are decentralized, especially with authority
of data used, as compared to a style characterized over operating decisions. The dierentiated struc-
by little analysis of data with very few dimensions tures are compatible with market heterogeneity
being taken into account in decision-making (Driver (Miller & Friesen, 1984). Leadership style is charac-
& Mock, 1975; Miller & Friesen, 1984). The pattern terized by high consideration and initiation of
of organizational characteristics of Cluster Two, structure, indicating a combination of informal
together with a long history, negative sales growth and formal approaches to management. This was
rate and low performance scores largely resemble evidenced in relatively large and established ®rms
that of Decline stage ®rms. where bureaucratic structures must be com-
Cluster Three shows a pattern of strategies with plemented with informal controls in order to
moderate emphasis on product innovation, and avoid sta tensions (Dent, 1987). Decision-making
strategic positioning through imitation of compe- style suggests an integrative approach with much
titors, lobbying governments and collusion with analysis of data by team eort (Driver & Mock,
competitors. These strategies signify the ®rms' 1975). The pattern as revealed in Cluster Four
eorts in improving eciency and pro®tability. does describe certain characteristics as expected at
Structures are fairly centralized, indicating a com- Revival stage, which is also supported by the sig-
bination of participative management with a few ni®cantly high performance, together with the
key managers dominating in strategy formulation long history in operation.
and implementation. The relatively undier- Cluster Five reveals a sub-group of ®rms focus-
entiated structures may be the result of ®rms' ing on strategies relating to product innovation
focussed product-market scope and stability of and establishing channels of distribution. Struc-
routine operations (Miller & Friesen, 1984). Leader- tures are centralized and undierentiated, sug-
ship style indicates a management approach which gesting little delegation of authority and simple
tends to be concerned with achieving targets and operation which may be due to a narrow product-
pro®tability (Hopwood, 1974). Decision-making market scope (Miller & Friesen, 1984). Leadership
style suggests a relatively high level of multiplexity style is relatively low in consideration but high in
and moderate amount of data used. These charac- initiation of structure. This style implies a man-
teristics imply a careful consideration of decision agement approach with budget emphasis (Hop-
alternatives due to increased professionalism and wood, 1974). Decision-making only takes into
complexity in operations (Driver & Mock, 1975; account a relatively small number of factors and
Miller & Friesen, 1984). Collectively, the pattern opinions despite a large amount of data used.
revealed in Cluster Three is consistent with that Under this style, goals tend to be personal and
few. Overall, the characteristics ®t into the cat- regardless of life-cycle stages, with growth ®rms
egory of ®rms at the Birth stage.20 ranked the highest (median=7.00) and declining
Having analyzed the characteristics within each ®rms ranked the lowest (median=4.00). Table 4
cluster (Table 2) and re-examined the preliminary presents the speci®c MAS formality attributes
labels of clusters (Table 3), the relevant life-cycle (selection and presentation of information) across
stages were assigned. The emergent clusters as per life-cycle stages. Collectively, there are signi®cant
Table 3 were labeled Birth (Cluster Five),Growth dierences of MAS attributes across stages as
(Cluster One), Maturity (Cluster Three), Revival indicated by w2.23 Speci®cally, among all sample
(Cluster Four), and Decline (Cluster Two). ®rms, 12 MAS attributes dier signi®cantly across
To further con®rm the labels as assigned to the each stage. These include cash-¯ow statements,
respective clusters, Table 2 (Panel A) also presents capital budgeting, long-term planning and fore-
the size of the ®rms in terms of number of casts, quality controls, environmental scanning,
employees. Birth ®rms have the least number of ®nancial information for performance evaluation,
employees, suggesting the smallest ®rm size among long-term criteria for performance evaluation,
all stages. Growth ®rms have the largest number aggregation (combination of data over functional
of employees, suggesting expansion of ®rm size to areas), scope of information (internal, ®nancial
match with the increasing complex activities. The and future-oriented) and timeliness of information
number of employees drops at the maturity stage (time-lag in receiving information).
due to stagnation of activities and unexpectedly Table 5 presents the Mann±Whitney U-test
does not increase at the revival stage. However, results for identifying whether MAS formality
®rms at the decline stage indicate further down- attributes signi®cantly dier between consecutive
sizing. Together with the patterns of sales growth life-cycle stages. As shown in Table 5, signi®cant
rates and performance weighted scores, the organ- dierences were found in three MAS attributes
izational characteristics and demographic pro®le between birth and growth stages, 13 between
con®rm the cluster labels. growth and maturity stages, three between maturity
and revival stages, and six between revival and
6.2. Pro®ling of MAS attributes decline stages.
After the clusters had been labeled, a pro®le of 6.3. Field studies results
MAS of each life-cycle stage was obtained in order
to identify dierences across and between stages.21 To facilitate interpreting ®ndings from the
Both the Kruskal±Wallis and Mann±Whitney cross-sectional data, qualitative data were
U-tests for each of the MAS variables were per- obtained from ®eld studies. Using the data-trian-
formed.22 Evidence suggests that, in general, MAS gulation approach on interview discussions,
are computerized (median of all sample=6.00)
23
The question of whether life cycle is a proxy for some
20
This label was con®rmed as one of the ®rms in Cluster other contextual variables is essential to the motivation of
Five which was by chance selected for interviews. Evidence con®gurational approaches. Indeed, in Gordon and Miller's
from the ®eld studies revealed that this ®rm was a ``birth'' ®rm (1976) original argument, that appears to have in¯uenced much
which had never been successfully established since its forma- of this research in accounting, it was the ``gestalt'' that could
tion 8 years previously. explain more powerfully the dierences in accounting systems
21
The cluster solutions with small cell sizes lead to limita- than single variables. Despite the testing of gestalts (as distinct
tions in con®rming signi®cant dierences between stages. from single variables) being the motivation for the study, we
However, this is regarded as acceptable in view of the explora- have tested some single variables (e.g. age and size). In terms of
tory nature of this study. the 27 MAS attributes (selection and presentation), only three
22
Due to the small number of observations in four of the were signi®cantly correlated with single variables (one with age,
®ve cells, non-parametric tests are more appropriate. two with size).
Table 4
MAS formality attributes across life-cycle stagesac
Stages of organizational life-cycle
Entire Birth Growth Maturity Revival Decline Kruskal±Wallis

sample Test
(n=49) (n=2) (n=4) (n=29) (n=5) (n=9) Chi-square
Median Median Median Median Median Median d.f.=4
(IR) (IR) (IR) (IR) (IR) (IR)
Selection of information
Reliance on
1. Monthly pro®t and loss statement 6.00 (2.00) 3.50 (±) ± (±)b 6.00 (2.00) 6.00 (4.00) 6.00 (3.50) 8.60
2. Monthly balance sheet 6.00 (3.00) 3.50 (±) ± (±)b 5.00 (3.00) 5.00 (3.50) 4.00 (3.50) 8.08
3. Cash-¯ow statements 6.00 (2.00) 6.50 (±) ± (±)b 6.00 (2.00) 6.00 (1.75) 4.00 (3.00) 14.09**
4. Cost accounting 5.00 (2.00) 5.50 (±) 6.00 (5.00) 5.00 (1.52) 5.00 (2.02) 5.00 (3.00) 0.71
5. Authoritative budgetary control 5.00 (2.00) 4.00 (±) 5.50 (5.25) 5.00 (3.00) 6.00 (1.50) 5.00 (2.02) 3.09
6. Participative budgetary control 3.80 (3.50) 4.00 (±) 4.50 (4.50) 4.00 (2.50) 5.00 (3.10) 3.00 (2.00) 2.91
7. Capital budgeting 5.00 (3.50) 6.50 (±) 7.00 (0.75) 5.00 (2.50) 5.00 (2.69) 2.00 (3.00) 12.80*
8. Long-term planning and forecasts 5.00 (3.00) 3.50 (±) 7.00 (1.77) 5.00 (3.00) 6.00 (2.00) 4.00 (4.00) 10.69*
9. Responsibility accounting 5.00 (3.00) ± (±)b 6.50 (1.75) 5.00 (2.00) 6.00 (4.50) 6.00 (5.00) 7.71
10. Quality controls 6.00 (2.00) ± (±)b 6.50 (1.00) 5.04 (1.50) 6.00 (1.00) 5.00 (4.50) 13.77**
11. Environmental scanning 4.00 (3.00) 4.50 (±) 5.50 (4.50) 3.00 (2.00) 6.00 (2.50) 3.00 (4.00) 10.42*
12. Financial information for 5.00 (2.00) 6.00 (±) ± (±)b 4.78 (2.00) 6.00 (3.50) 5.00 (4.50) 10.57*
performance evaluation
13. Long-term criteria for 4.00 (3.00) 3.00 (±) ± (±)b 4.00 (2.50) 5.00 (4.50) 2.00 (3.50) 13.66**
performance evaluation
Presentation of information
Aggregation and integration
1. Analytical or decision models 3.00 (2.50) 3.50 (±) 6.00 (4.50) 3.27 (2.50) 3.00 (2.50) 3.00 (3.00) 5.10
2. Combination of data over time 5.00 (3.00) 5.50 (±) 6.50 (1.75) 4.46 (2.50) 5.00 (3.00) 5.00 (3.50) 7.32
3. Combination of data over 4.00 (2.50) ± (±)b 6.50 (1.75) 4.00 (2.50) 6.00 (3.50) 4.00 (3.50) 14.52**
functional areas
4. Reporting on intra-subunit 3.00 (2.00) ± (±)b 6.00 (4.25) 3.00 (2.00) 2.00 (3.00) 2.00 (2.51) 9.22
interactions
Scope
1. Internal 6.00 (1.00) 6.50 (±) 7.00 (0.75) 6.00 (0.78) 6.00 (2.00) 5.00 (5.00) 12.72*
2. External 4.00 (2.00) 2.00 (±) 5.50 (3.75) 4.00 (1.50) 5.00 (2.46) 4.09 (3.00) 6.89
3. Financial 6.00 (1.00) 6.50 (±) ± (±)b 6.00 (1.00) 6.00 (3.00) 4.00 (2.25) 18.08***
4. Non-®nancial 4.00 (2.00) ± (±)b 5.00 (4.00) 4.02 (2.00) 4.02 (2.50) 3.00 (3.00) 7.04
5. Historic 5.00 (2.00) 6.50 (±) 4.00 (3.00) 4.82 (1.50) 5.00 (2.00) 5.00 (2.00) 5.43
6. Future 5.00 (2.00) 3.00 (±) 7.00 (2.25) 5.00 (2.00) 5.00 (3.50) 2.00 (3.50) 13.18**
Timeliness
1. Speed of reporting 5.00 (1.00) 6.50 (±) 5.50 (1.75) 5.00 (1.00) 6.00 (2.00) 5.13 (1.50) 7.78
2. Automatic reporting 4.54 (2.00) 4.00 (±) 4.50 (2.50) 4.54 (1.50) 6.00 (2.00) 4.00 (3.27) 5.31
3. Frequency of reporting 5.43 (2.00) 5.50 (±) 6.50 (1.75) 5.43 (2.50) 7.00 (2.00) 6.00 (4.00) 3.11
4. Time-lag in receiving information 6.00 (1.00) ± (±)b 6.50 (1.75) 5.48 (2.00) 6.00 (1.00) 5.00 (1.00) 14.52**
a
This table presents the medians, inter-quartile ranges (IR), and the results of Kruskal±Wallis tests of MAS formality attri-
butes which were measured on a seven-point Likert Scale where 1=Not used at all; 7=Used to a great extent.
b
The medians are not de®ned.
c
*P< 0.05. **P< 0.01. ***P< 0.001.
Table 5
Results of Mann±Whitney U tests of MAS formality attributesa,b
Birth±Growth Growth±Maturity Maturity±Revival Revival±Decline

Z Z Z Z
Reliance on
1. Monthly pro®t and loss statement 2.19* ±2.21* 0.15 ±0.69
2. Monthly balance sheet 2.19* ±2.29* 0.20 ±0.41
3. Cash-¯ow statements 1.14 ±2.41* 0.65 ±2.09*
4. Cost accounting 0.24 ±0.51 0.10 ±0.61
5. Authoritative budgetary control 0.25 0.00 0.75 ±1.89*
6. Participative budgetary control 0.24 ±0.53 0.74 ±1.43
7. Capital budgeting 0.56 ±2.51** 0.77 ±2.09*
8. Long-term planning and forecasts 1.48 ±1.96* 1.75 ±2.23*
9. Responsibility accounting 1.91 ±1.94* 0.67 ±0.55
10. Quality controls 1.94 ±1.86 0.40 ±1.14
11. Environmental scanning 1.41 ±1.53 0.67 ±1.97*
12. Financial information for performance evaluation 2.19* ±2.70** 1.89* ±1.23
13. Long-term criteria for performance evaluation 0.24 ±3.13*** 2.77** ±1.51
1. Analytical or decision models 0.75 ±1.34 0.12 ±0.21
2. Combination of data over time 0.49 ±2.38* 0.86 ±1.03
3. Combination of data over functional areas 1.91 ±2.76** 1.83 ±1.62
4. Reporting on intra-subunit interactions 1.91 ±1.83 0.45 ±0.41
Scope
1. Internal 0.56 ±2.13* 0.28 ±1.45
2. External 1.67 ±0.96 1.66 ±1.44
3. Financial 1.41 ±2.74** 0.18 ±1.49
4. Non-®nancial 1.94 ±0.51 0.42 ±0.67
5. Historic 1.19 ±0.68 1.29 ±0.96
6. Future 1.75 ±1.92* 0.60 ±1.58
Timeliness
1. Speed of reporting 0.97 ±1.26 1.68 ±1.14
2. Automatic reporting 0.24 ±0.25 1.53 ±1.97
3. Frequency of reporting 0.97 ±1.35 1.29 ±0.84
4. Time-lag in receiving information 1.10 ±1.82 2.63** ±2.56**
a
This table reports the results of Mann±Whitney Utests on MAS formality attributes between stages. Negative signs on the
Z-scores were found between Growth and Maturity stages, and between Revival and Decline stages, indicating declining medians
between these stages.
b
*P< 0.05. **P<0.01. ***P<0.001.
questionnaire responses and documentary evi- whether the hypotheses were supported using
dence, the demographic and organizational integrated qualitative and quantitative data, the
characteristics, together with MAS attributes of following section discusses the general pro®le of
case ®rms were deduced.24 Before examining the case ®rms.
24
NUD*IST (Numerical Unstructured Data for Integrating, Synthesising and Theorising) was used to support the qualitative data
analysis. NUD*IST is a software system that builds on and extends the code-and-retrieve technique. It has two major components for
managing both documents and ideas. The ®rst, a document system, holds textual-level data. The second, an index system, keeps the codes
and references. The system also allows the user to create and develop concepts and the user can explore the document and index systems,
together with the relations between the two provided by the coding of the documents (Richards & Richards, 1994, pp. 457±458).
6.3.1. Case ®rms decline stage were selected through judgmental

Table 6 presents the demographic characteristics sampling as they did not accept our invitation for
of these case ®rms25 and their respective life-cycle the ®eld study. Case ®rms within the same stage
stages as classi®ed by cluster analysis.26 The case could have extremes in years of age and number of
®rms are broadly representative of the clothing employees (Table 6). For example, YPL and RS
and footwear trade in that six of them are engaged in have been classi®ed as mature ®rms by both clus-
clothing manufacturing, wholesale and distribution, ter analysis and self-categorization, yet YPL has a
while the other four are footwear manufacturers history of 72 years with 600 employees while RS
and wholesalers. The clothing businesses cover a has only 8 years of operation and 55 sta.
wide range of product lines including ladies' fashion, The distribution of the majority of case ®rms is
children's wear, industrial clothing, corporate at maturity and revival stages. This is consistent
uniforms and sportswear. The footwear businesses with the long history of the clothing and footwear
include ladies' and children's shoes together with industry which has been undergoing some business
men's boots. Despite the wide range of product stagnation and then revival in recent years. This
lines involved, these businesses are operated revival has been evidenced by organizational
within a single industry with similar environ- restructuring and changes in product-market stra-
mental conditions. tegies by some of the ®rms striving for survival.
Half of the ®rms interviewed were located in For the purpose of comparing MAS attributes of
Victoria as it is the state in which the majority of case ®rms across stages, their scores are presented
clothing and footwear businesses have been tradi- in Table 7.
tionally established. Their years of operation ranged
widely from 8 to 83 years and their sizes from zero
to 600 employees. In terms of legal structure, eight 7. Discussion and integration of ®ndings
out of the 10 case ®rms interviewed were proprie-
tary limited companies, while the other two were a Results of quantitative data analysis (n=49)27
unit trust and a partnership, respectively. The indicate that there are distinctive patterns of
majority of the case ®rms were family businesses organizational characteristics and MAS formality
(eight out of 10), indicating signi®cant controls across life-cycle stages. This suggests that ®rms
over the operating activities by the owners and within each stage appear to have an internal con-
their family members. sistency of these characteristics which form an
According to the classi®cation using cluster individual life-cycle con®guration. These results
analysis, one of the case ®rms was at the birth provide some support of the hypotheses, in partic-
stage, one at the growth stage, six at the maturity ular the overall theme. Findings from ®eld studies
stage and two at the revival stage. No ®rms at the (n=10)28 supplement the quantitative data in
explaining how and why MAS change across life-
25
The background of each case ®rm is summarized and cycle stages.
presented in the Appendix.
26
CEOs were asked to self-categorize their ®rms into 7.1. Pattern of change in MAS formality across
respective life-cycle stages. Their self-categorizations were the stages (Hypothesis 1)
result of their ``self-insight'' as discussed in the ``human infor-
mation processing'' literature. Dierence in ``self-insight'' may
give rise to inconsistent judgment. Inconsistent judgment may Hypothesis 1 (H1) posits that MAS formality
be primarily due to the use of dierent methods of appraisal, or (in terms of selection and presentation of infor-
dierent emphasis on the relative importance of various fac- mation) will increase from birth to growth stages,
tors. Based on CEOs' self-categorization, there are two growth
®rms (20% of the interview sample) with another three at the
maturity stage (30%) and ®ve undergoing revival (50%). 27
These include the case ®rms and will be referred to as
Comparison between the subjective and objective categoriza- ``sample ®rms'' in subsequent discussion.
tions of life-cycle stages shows 50% consistency in classi®ca- 28
These will be referred to as ``case ®rms'' in subsequent
tion. discussion.
Table 6
Demographic characteristics and life-cycle stages of case ®rms
Namea Demographic characteristics
Principal business Location Age Size Legal Family Life-cycle

(years) (no. of structure businessb stage
employees) (cluster
analysis)
FF Children's footwear manufacturer and wholesaler Victoria 8 0c Pty Ltd Yes Birth
BC Children's clothing manufacturer and distributor Victoria 8 41 Pty Ltd No Growth
DF Ladies' footwear manufacturer and wholesaler Victoria 16 250 Pty Ltd Yes Maturity
HBC Boot manufacturer and wholesaler Victoria 83 14 Pty Ltd Yes Maturity
LM Ladies' and children's clothing manufacturer New South Wales 43 300 Pty Ltd Yes Maturity
and wholesaler
RS Sportswear manufacturer and wholesaler Queensland 8 55 Pty Ltd Yes Maturity
RWF Ladies' footwear manufacturer and wholesaler Queensland 16 45 Unit Trust Yes Maturity
YPL Industrial clothing manufacturer and wholesaler Victoria 72 600 Pty Ltd Yes Maturity
AF Corporate uniforms manufacturer Queensland 23 21 Partnership Yes Revival
CC Ladies' clothing manufacturer and wholesaler New South Wales 13 39 Pty Ltd No Revival
a
Initials are used to mask the ®rm's identity.
b
Chief Executive Ocers were asked to indicate ``Yes'' or ``No'' to the question as to whether their businesses were family-owned.
c
Records kept by the association which recommended the ®rm for interview indicated that it had four employees. At the interview,
there were no paid employees in the ®rm.
relax at the maturity stage, and increase slightly at the 4.00), it accelerates to high levels (median=6.25)
revival stage but decrease at the decline stage. To test by the growth stage. Three selection attributes
this hypothesis a composite index of MAS formality (namely monthly pro®t and loss statement,
(measured in terms of selection and presentation) for monthly balance sheet, and reliance on ®nancial
each ®rm was generated based on questionnaire performance evaluation) were signi®cantly dier-
responses. The median of these composite scores at ent for this transition (Table 5). This may be
each life-cycle stage was identi®ed and plotted on a explained by the increasing need for formal
graph as shown in Fig. 2, portraying a pattern of reporting and objective performance evaluation as
change in MAS formality across life-cycle stages. ®rms grow larger in terms of activities and number
The transition pattern shown in Fig. 2 oers of employees. However, MAS formality (in seven
support for H1. It indicates that sample ®rms selection attributes and ®ve presentation attri-
increase their reliance on formal MAS from birth butes) decreases signi®cantly from growth to
to growth stages. Reliance on formal MAS for maturity (median=5.11), suggesting that mature
control purposes is relaxed at the maturity stage ®rms may rely on both formal and informal con-
and slightly increased at the revival stage. Such trols. To cope with the information needs of revi-
reliance is then reduced at the decline stage. val, ®rms tend to increase their level of MAS
As shown in Table 5, signi®cant dierences in formality (median=6.00), but only signi®cantly in
MAS formality (in particular the selection attri- reliance on ®nancial information for performance
butes) across life-cycle stages largely occur in evaluation, reliance on long-term criteria for per-
transitions from growth to maturity and from formance and time-lag in receiving information.
revival to decline. The lack of signi®cant dier- As expected, MAS formality (median=3.82)
ences in MAS formality at the transition from the decreases relatively signi®cantly as ®rms enter
birth to growth stage may be explained by the decline stages. This decrease is especially so for the
small sample sizes in both cells. The results suggest selection attributes, but not so for the presentation
that while the level of MAS formality at the birth attributes (except the time-lag in receiving infor-
stage is generally rated moderately (median= mation).
Table 7
MAS formality attributes of case ®rmsa
Birth Growth Maturity stage Revival stage

stage stage
FF BC YPL HBC DF RWF LM RS AF CC
Reliance on
1. Monthly pro®t and loss statement L (1) H (7) H (6) H (6) H (7) H (7) H (6) H (7) L (1) M (5)
2. Monthly balance sheets L (1) H (7) H (6) H (6) M (5) H (7) M (4) H (7) L (1) M (5)
3. Cash-¯ow statement H (7) H (7) M (3) H (6) H (6) H (7) H (6) H (7) H (7) M (5)
4. Costing M (5) H (7) H (6) H (6) H (7) H (7) M (5) M (5) M (4) M (5)
5. Authoritative budgetary control H (7) L (1) M (5) H (7) M (3) H (7) M (5) L (1) H (7) H (6)
6. Participative budgetary control L (1) H (7) M (3) H (6) H (6) H (6) M (5) H (6) H (6) H (6)
7. Capital budgeting H (7) H (7) H (6) H (7) H (6) M (5) M (3) L (2) M (5) M (5)
8. Long-term planning and forecasts M (5) H (7) M (3) H (7) H (6) L (2) M (4) L (2) L (1) M (5)
9. Responsibility reporting L (1) H (7) H (6) H (7) H (7) H (6) M (4) L (1) L (1) H (7)
10. Quality controls L (1) H (7) H (6) H (7) M (5) H (6) M (5) M (4) H (6) H (6)
11. Environmental scanning M (4) H (7) H (6) H (7) L (2) H (6) M (3) L (1) H (7) H (6)
12. Financial information for performance evaluation L (1) H (7) M (3) L (1) H (7) H (7) M (4) M (4) L (2) M (4)
13. Long-term criteria for performance evaluation L (1) H (7) H (6) L (1) M (5) L (1) M (4) NA L (1) M (5)
1. Analytical or decision models H (6) H (6) M (5) M (4) H (7) L (1) L (2) M (4) M (3) M (3)
2. Combination of data over time H (7) H (7) M (5) H (6) H (6) L (1) M (5) M (3) H (7) M (3)
3. Combination of data over functional areas L (1) H (7) M (5) M (4) H (6) L (1) M (5) M (3) H (7) M (3)
4. Reporting on intra-subunit interactions L (1) H (7) NA M (4) H (6) H (6) L (2) L (1) L (2) M (5)
Scope
1. Internal H (6) H (7) H (6) M (5) H (6) H (6) H (6) M (5) M (4) H (6)
2. External M (3) H (7) M (5) M (4) M (4) H (6) M (5) L (1) H (7) M (5)
3. Financial H (7) H (7) M (5) M (4) H (7) H (6) H (6) NA H (7) H (6)
4. Non-®nancial L (1) H (7) H (6) M (4) H (6) M (3) M (4) NA H (7) M (5)
5. Historic H (7) H (7) M (5) M (5) M (5) M (3) M (5) NA M (4) M (4)
6. Future M (4) H (7) M (5) M (5) H (6) M (4) M (5) NA H (6) M (5)
Timeliness
1. Speed of reporting H (6) H (7) H (6) H (6) M (5) M (5) M (5) H (6) H (7) H (6)
2. Automatic reporting L (1) H (7) H (6) H (6) H (6) M (5) M (5) NA M (5) H (7)
3. Frequency of reporting M (5) H (7) H (7) H (6) H (7) H (6) M (5) NA M (5) H (7)
4. Time-lag in receiving information H (7) H (7) H (6) M (5) H (6) M (5) M (5) NA H (7) H (7)
a
MAS attributes were measured on a seven-point Likert Scale where 1=Not at all; 7=Used to a great extent, L, low (<3); M,
moderate (3±5); H, high (>5). Values in italic represent MAS attributes with signi®cant dierences.
To illustrate the ®rst point of this pattern of As we are using a cash-basis of accounting,
change so as to better interpret and understand we know that we have made pro®ts as long
the results, consider the case of FF, a birth ®rm there is a surplus. Otherwise, it would be a
with a niche strategy in children's footwear and a loss. . . I designed the accounting system to
highly centralized structure. FF 's MAS was suit myself and it has been changed from time
observed to be simple and informal. Although to time. My computer mainly supplies
FF's MAS is computerized, it only provides basic accounting services and sales information. I
functions of cash-basis reporting, inventory and like to know very quickly who bought what,
debtor records. Its CEO/director explained: the quantity and the colors of the shoes.
Fig. 2. Pattern of MAS formality across life-cycle stages. The line portrays the median of a composition index of MAS formality
(including both ``selection'' and ``presentation'' attributes) of all ®rms at each life-cycle stage.
This coincides with Simons' (1995, 1999) obser- On a number of occasions we had to do
vation that ®rms at the birth stage have little speedy repeats. We ran out of products so
demand for formal control. Employees are in quickly and we did not have the formality
constant face-to-face communication with each of systems we now have. . . What happened in
other such that it is possible to control key aspects the past was that when we had over-sales
of the business without formal structure. situations and we lost our customers.
The pattern of change in MAS formality in the
move from birth to growth is illustrated by BC. This highlights the necessity to act with alacrity
BC's MAS was gradually formalized due to its in the interests of keeping customers. Notably the
expansion of product-lines and markets, together re¯ection indicates that to protect its customer
with the development of decentralized structures. base during such growth phases, the director
These increasingly complex business activities emphasized that it was the formality of its systems
pushed the ®rm to formalize its MAS as the that needed increasing. In all, it suggests how
volume of information became too much to han- managers in successful growth ®rms recognize the
dle by the old manual system. The dramatic need for, and subsequently go about, increasing
growth in BC's business, using a direct-selling formality.
approach, was accompanied by a signi®cant To facilitate development of its MAS to the
increase in sales executives (from 120 to over 500 current level of formality, BC increased pro-
currently). The increase in the number of sales fessionalism in its management team. BC involved
executives not only aggravated the complexity in both internal sta experts and external consultants
calculating incentive payments, but also required to design their MAS in order to cater for the ®rm's
formal systems to tighten control in production expanding activities. For example, 5 years ago,
schedules and sales orders. BC's director recalled: BC created the position of a Data Processing
(DP) Controller responsible for systems design mented their formal systems with informal con-
and development of relevant software speci®c to trols and communications. Field study data were
the company's needs. BC also saw the need to generally consistent with this pattern of change for
have a specialized person responsible for the mature ®rms. This may suggest that sample ®rms,
®nance area so it employed a full-time quali®ed on average, acknowledge the weaknesses of formal
accountant to replace the part-time position. Par- systems as highlighted by Mintzberg (1978). For-
ticipative management prevailed as sta were mal systems by their aggregation processes tend to
allowed to be involved in decision-making. In provide information that is both too general and
particular, sta participated in designing and con- often too late to be of use. Furthermore, they tend
tinuously up-grading the MAS. to ignore external, non-qualitative and non-eco-
Further examples of BC's increased levels of nomic information.
formality were the ®rm's emerging emphasis upon Despite increased professionalism in its man-
integration and timeliness. While the existing MAS agement through employing a quali®ed ®nancial
was able to co-ordinate sales orders, inventory con- controller, the MAS of a mature ®rm RS was not
trol and cash payments, the DP Controller and fully computerized at the time of interview. Its
Financial Accountant later developed various managing director observed:
packages for ecient ®nancial and operational con-
trol functions. The DP Controller explained: . . .Computerized systems are not working
eectively for small businesses like us. We use
We have done a certain amount of inter- formal controls in general management,
facing between the ®nancial and normal accounting functions, stock controls and
packages. . . With the current phone-in sys- monitoring margins. . . Management for small
tem, our sales teams will be on the telephone businesses is not too concerned with the speci®c
and send the orders to the DP department scope and frequency of information supplied.
and instantly the computers will record the The crucial requirement for management is
items which have been sold. . . The sta in the relevant information. . . With computerized
warehouse have computer-generated picking- systems, it takes a lot of data-entry times. The
slips and from which invoices are produced. . . return does not always justify the time spent.
The system is on-line, so when dierent There are general systems providing us with
departments want any information they can what is required. However, sometimes we can
obtain it immediately. only get the information in a very general
form. It takes a lot of time to synthesize it. I
BC's increasingly formal MAS played a sig- have lost a lot of control with all these dierent
ni®cant role in gathering and processing a diverse contents. I feel as if I do not have control over
range of up-to-date information. In addition, it my business with masses of information. . .
monitored ®nancial performance and facilitated
communication between departments and sales Insight into how ®rms, particularly mature
executives outside the company. The pattern of ®rms, augmented their formal information can be
these changes in the formality of MAS at BC as it gleaned from the circumstances of YPL (one of
moved from start-up to growth, corresponds with the mature ®rms interviewed). When YPL com-
an increasing emphasis upon the use of diagnostic puterized its MAS, it also formalized the respon-
controls for ®rms at the growth stage as was sug- sibility areas which identi®ed the scope of
gested by Simons (1995). management responsibility. While the internal
Consistent with expectations, the quantitative control and reporting became formal, the expected
data show that mature ®rms in our sample tended increase in environmental scanning occurred
to relax their MAS formality. This, however, does through the gathering of external information
not necessarily coincide with a reduction in the use concerning the industry by informal channels.
of control information because ®rms supple- YPL's managing director explained:
We normally obtain external information time to tell me what's going on or ask my

informally. A lot of external information was advice. . . We talk to people a lot on dierent
gained from contact with peers in dierent occasions. That is the best piece of informa-
segments of the industry, such as attendance tion we can get, such as quality, fabric color,
at seminars. It has never been formalized. . . It everything. . .
is not uncommon for us to have people come
and look at our manufacturing and distribu- In contrast to this reviving ®rm, consider the
tion processes and equally we will go and visit case of AF that faced the need for revival from a
our counterparts. position of extant systems of far less formality
than CC. In its case, the revival needed to add
This is consistent with the argument that ®rms formalized systems. At the time of the interview,
with increasingly uncertain environments and the ®rm had a manual information system but its
complex activities use informal information sys- managing partner realized the importance of relying
tems to supplement formal systems (Emmanuel, on computers to process the voluminous informa-
Otley & Merchant, 1990). Also adoption of an tion on clients. In particular, to sustain its revival,
informal channel for searching external informa- the managing partner realized the need for on-line
tion of economic and quantitative nature accords information on details of customers' orders and
with the intense competition as faced by ®rms at stock levels. She observed:
the maturity stage (Clancy & Collins, 1979; Hop-
wood, 1973; Porter & Lawler, 1968). . . .We are considering computerizing our
Some mature ®rms reach a stage where their information as we grow in size. The customers'
MAS become too rigid and inhibit them from records and machine activity time are most
adapting to changing environments. This can important. It is dicult to go back to the
contribute to decline. In such cases ®rms have to records when customers query size and colors.
build capacity for coping with administrative Sometimes you have to go over three years'
complexity and ``turnaround'' strategies (Gupta & records. . . We see the need of advancing com-
Chin, 1990; Miller & Friesen, 1983). Increasing the puterization as the number of customers grow.
formality of their MAS is part of building this
capacity. But there is almost a sense of re-entering AF's stated intent in computerizing its MAS
the enthusiasm and informality of the start-up was to supply and ®lter management information
phase that is now complemented by the accumu- to achieve its revival. However, it is acknowledged
lation of formal systems that have evolved over that formality of information systems may be
time. This again suggests that it is a combination independent of their computerization, especially as
of formal and informal controls that is required these systems may not be able to provide qualita-
due to the increasingly diversi®ed activities and tive, behavioral, external and speculative informa-
dierentiated structures of the ®rms. Formal tion (Emmanuel et al., 1990).
bureaucratic practices may be insucient for the The ®nal change in the pattern is that MAS
speci®c contexts confronted by such ®rms, so that formality is lessened at the decline stage as ®rms'
ongoing co-ordination and adaptation has to be activities become stagnant and their resources are
achieved by informal interaction (Dent, 1987). limited. They seem to be caught in a vicious circle
Accordingly, MAS need to promote such interac- such that their rather informal MAS fail to supply
tion by allowing a ¯exible approach to management. the relevant information on time for them to cope
This reliance upon informality at revival is best with their external threats and internal vulner-
exempli®ed by CC (a reviving case ®rm) whose ability (Miller & Friesen, 1984). As noted pre-
managing director observed: viously, no decline ®rms were included in the ®eld
interviews for reasons cited, and hence, we can
We get our information by informal commu- oer no additional insights as to this part of the
nication as well. My sta can just walk in any pattern of change that coincides with expectations.
Further analysis of quantitative data suggests with only seven signi®cant presentation dierences).
that the majority of signi®cant dierences in MAS The following sections will discuss the results
attributes distinguish the decline stage from all according to speci®c MAS attributes and the nat-
other stages in that decline ®rms register the low- ure of dierences across life-cycle stages rather
est scores (Table 4). While we expect that sample than the totality of MAS formality within each
®rms at the birth stage will not have developed stage. Where appropriate, ®eld evidence will be
formal MAS, it is noticeable that sample ®rms at used to provide ex post insight into why some of
the decline stage generally have even lower levels the propositions are not supported by the quanti-
of formality in their MAS than those of the birth tative ®ndings.
®rms. These decline ®rms have the lowest level of
reliance upon a range of management accounting 7.2.1. Selection of information Ð Hypothesis 2 (a)
tools. This is consistent with the ®ndings of Findings from the survey (Tables 4 and 5) are
Miller and Friesen (1983, 1984) that decline partially consistent with expectations. In terms of
®rms' comparative lack of formal management selection of information, ®rms at the birth stage
controls among all other stages may be due to rely on the narrowest range of formal manage-
insucient resources and uncertainty of future ment accounting tools. In particular, the two
survival. sample birth ®rms do not rely on responsibility
accounting and quality controls at all (both rated
at ``1''). This was evidenced in the case ®rm at the
7.2. Nature of dierences in MAS attributes birth stage, FF, which had no employees to war-
across stages (Hypothesis 2) rant reliance on responsibility accounting and the
lack of quality control explained why this ®rm was
Hypothesis 2 (H2) posits the speci®c nature of facing diculty on its commencement.
dierences in MAS formality attributes (in terms As expected, ®rms at the growth stage rely on a
of selection and presentation of information) wider range of formal management accounting
across life-cycle stages. In particular, H2(a) sug- tools than those at other stages. This is supported
gests that in terms of selection of information, by all the selection attributes being rated at high
®rms at the growth and maturity stages will rely scores, with the lowest median (=4.5) for participa-
on a wider range of managing accounting tools tive budgetary control. Speci®cally, all sample ®rms
than ®rms at birth, revival and decline stages. H2 rated ``7'' for monthly pro®t and loss statement,
(b) states that in terms of presentation of infor- monthly balance sheet, capital budgeting, long-term
mation, the levels of aggregation and integration planning and forecasts, ®nancial information for
will be higher, and the scope will be broader at the performance evaluation and long-term criteria for
growth and revival stages than at other stages. performance evaluation. These typically re¯ect the
Firms at the growth and revival stages will require need for formal ®nancial control for long-term
timely information more than ®rms at other life- growth and development as evidenced in BC, the
cycle stages. MAS formality increases from birth case ®rm at the growth stage.
to growth and from maturity to revival stages but Contrary to expectations, ®rms at the maturity
the decreases from growth to maturity and revival stage rely on a narrower range of formal manage-
to decline are far more signi®cant. In particular, ment accounting tools than those at the growth
the signi®cance of all changes in MAS formality stage. Signi®cant decrease in reliance on selection
are driven by selection more so than presentation attributes is observed in monthly pro®t and loss
attributes. Results of Kruskal±Wallis tests shown in statement, monthly balance sheet, cash-¯ow state-
Table 4 indicate signi®cant changes in reliance on 12 ments, capital budgeting, long-term planning and
MAS attributes across life-cycle stages. The between- forecasts, responsibility accounting, ®nancial
stage dierences in selection attributes are more sig- information for performance evaluation and long-
ni®cant than presentation attributes as shown in term criteria for performance evaluation. As
Table 5 (18 signi®cant selection dierences compared explained by ®eld data, most of the mature ®rms
were not at all concerned with their cash positions evidence from other studies that performance criteria
due to their long history of establishment. This are associated with respective strategic missions
was well-illustrated by YPL which was well- (Govindarajan, 1984; Govindarajan & Gupta,
known with its brand-products in the market such 1985). Also, the results accord with the recom-
that pro®tability and cash positions were its least mendations in SMA 4D that the primary ®nancial
concern. This may explain why it tended to relax performance measures tend to exhibit speci®c
in ®nancial controls. Its director commented: patterns that can be associated with stages of an
entity's growth.
. . .Having been in ®rms which are short of Field data also suggest that the growth ®rm, BC,
money or cash ¯ow shortage, cash ¯ow man- relied heavily on long-term criteria as performance
agement is critical. In an organization like measures rather than short-term ®nancial mea-
this (YPL), because it is seventy years old and sures. It evaluated the performance of its sta and
so well established, the need for cash ¯ow sales team based on their achievement and perso-
management is not a major part but it is not nal development. The rewards were either intrinsic
ignored. If you manage the pro®t side of the through recognition in the ®rm's newsletters, or
business and you manage the key assets, the extrinsic through scholarship awards to those suc-
cash side tends to look after itself. I mean key cessful members of sta and sales teams. BC's
assets Ð working capital in particular. . . Vision Statement outlined its commitment to:
Reliance on formal MAS in terms of selection of a continuous education and personal devel-
information is greater at the revival stage than at opment program which supports all these
maturity. However, the changes in reliance from partners (including sta, sales team, hosts,
the maturity to revival stages are not signi®cant customers, suppliers, manufacturers. . .) shar-
except for the selection attributes: ®nancial criteria ing the rewards of success. . .
for performance evaluation and long-term criteria
for evaluation. Reliance on formal management BC's emphasis on mission and vision statements
accounting tools reduces at the decline stage as during its growth stage exempli®ed Simons'
expected. Firms at this stage tend to decrease their observation that ®rms at the end of the growth
reliance on cash-¯ow statements, authoritative stage tend to implement a formal belief system.
budgetary control, capital budgeting, long-term Through such systems, mission and vision state-
planning and forecasts, environmental scanning. ments are created and communicated to ``motivate,
Such changes may account for ®rms' decline, or it empower and supply direction'' (Simons, 1995).
became a vicious circle that these ®rms failed to However, reliance on ®nancial and long-term
prosper because of insucient resources for a for- criteria for performance evaluation is signi®cantly
mal system (Miller & Friesen, 1983, 1984). relaxed during transition from growth to maturity.
Some speci®c selection attributes warrant fur- Explanation may be sought from the case of YPL
ther discussion as they dier signi®cantly between where performance evaluation relied on ®nancial
stages. For example, strong signi®cant between- information while qualitative information was
stage dierences were found in performance eval- used informally by departmental managers. Eva-
uation. Sample ®rms at the growth stage used luation was usually based on short-term criteria.
®nancial and long-term criteria to the greatest Its managing director observed:
extent compared with those at all other stages
(Tables 4 and 5). This implies a strong focus on . . .As a family business the executive chair-
objective measures as well as attaining sales man tends not to put a great deal of value on
growth, increasing market share, and undertaking long-term formalized planning. So it is very
research and development, expanding product hard to have long term measurement. . . We
lines and encouraging personal development of use quantitative ®nancial performance mea-
sta. This is consistent with the expectation and sures in terms of production reporting while
qualitative measures are not that for- industry know our problems and the creditors
malized. . . are reasonably supportive. The banks give us
good support as we are well-established with
It is also noted that YPL relied on both formal a strong background. We may pay one month
and informal measures which exempli®es how and the next we may delay our payments.
mature ®rms' MAS dier from that of growth Once the economy has turned around our
®rms in terms of the level of formality. cash-¯ow will improve dramatically.
Signi®cant between-stage dierences were also
found in cash-¯ow statements. All sample ®rms, Similar to ®rms at the growth stage, manage-
except those at the decline stage, rely heavily on ment at the revival stage tends to rely heavily on
cash-¯ow statements. This may imply the lack of cash-¯ow information for strategic planning and
cash control in declining ®rms. Field data also repositioning. Both the case ®rms at this stage, AF
reveal heavy reliance on cash-¯ow statements and CC, regarded cash-¯ow statements as impor-
among case ®rms across stages, but with dierent tant. AF's managing partner remarked:
levels of formality. Consistent with the evidence
from the life-cycle literature that birth ®rms have We rely on cash-¯ow statements all the time. . .
to confront problems to maintain cash reserves for For small businesses like us, quality products
acquiring resources and achieving technical e- and services were only one of the critical success
ciency (Kimberley, 1980; Smith et al., 1985), FF factors. Most importantly, the business has to
relied heavily on cash-¯ow statements to gauge its generate enough cash-¯ow. It is absolutely
customers' payments. It suered from bad debts important to have tight control over cash-¯ow.
and had to downsize its business due to insucient
funds for operations. Reliance on cash-¯ow statements is signi®cantly
While FF's MAS provided cash controls on a reduced at the decline stage, indicating the lack of
simple customer basis, BC's MAS demonstrated a formal cash control which might have contributed
more sophisticated and integrated mechanism for to insucient ®nancial resources for ®rms' survival.
providing tight cash and credit controls. As a Heavy reliance on capital budgeting was found
result, this growth ®rm had never suered from at the birth, growth and revival stages, suggesting
poor liquidity and bad debt problems. these ®rms' expectations of further expansion.
Reliance on cash-¯ow statements is signi®cantly Such reliance is then relaxed at the maturity stage
decreased from growth to maturity stages and even decreases at the decline stage (Tables 4
(Table 5). However, the director of HBC (a and 5). However, ®eld data (Table 7) provide
mature case ®rm) considered cash control as mixed results. One of the case ®rms, HBC, relied
important due to the nature of production and the heavily on capital budgeting. In order to maintain
shrinking industry but, due to its long history of its competitive advantage in the market, together
establishment as a mature ®rm, it was able to with a niche strategy in equarian and mountaineering
obtain considerable ®nancial support from cred- footwear, HBC emphasized product quality. In
itors and banks. This demonstrates a case of achieving this, the ®rm formalized its production
relaxation of formal control supplemented with by acquiring plant and machinery of advanced
informal channels for sustaining cash reserves technology. HBC's director recalled:
through personal connections with creditors and
banks. HBC's director explained: We are successful by concentrating on the
niche market and working very hard on this
The industry as such is of high material con- niche market. We have formalized our pro-
tent and we always have cash-¯ow problems. duction and are re®ning our products all the
At the time now when the economic situation time. . . I believe we are now the strongest
is poor, the position would be obviously manufacturer in the world. If we make
worse. Basically, most of the suppliers in this stronger and better products through constant
technological advancement, we will maintain Reliance on environmental scanning is highest

our competitiveness in the long-term. at the revival stage and signi®cantly reduced at the
transit from revival to decline stages (Tables 4 and
Consistent with the long-term strategic orienta- 5). This accords with the competitive and diversi®ed
tion prevailing in sample ®rms at growth and markets as confronted by the reviving ®rms as
revival stages, these ®rms rely on long-term plan- compared to the more homogeneous markets
ning and forecasts signi®cantly more so than ®rms aecting ®rms at the maturity and decline stages.
at other stages (Tables 4 and 5). Reasons why Field evidence also generally supports the quanti-
some mature ®rms do not rely heavily on long- tative data that revival ®rms kept themselves
term planning were gleaned from the interview abreast with what was happening in the external
with YPL's managing director. He explained: markets. Constant environmental scanning
enabled them to adopt appropriate revival strat-
. . .As a family business the executive chair- egies. For example, CC conducted its own market
man tends not to put a great deal of value on research and changed its product lines as part of
long-term formalized planning. . . We are in its revival strategy after its business met its down-
the process of changing now and in the next turn. Its managing director recalled:
six months we will have a three-year plan.
This re¯ects the changes in business and in During its operation over the past twelve
business attitudes. . . years, we have looked at our position in the
market place and conducted our own market
Evidence suggests that birth ®rms rely least on research. In the latter half of last year, we
quality controls as compared with those at other found some faults in its marketing and
stages (Tables 4 and 5). As ®rms grow, quality adjusted them accordingly. The main ratio-
control become increasingly important. As nale for reviewing our marketing was that we
revealed by the case interviews, ``quality product found our labels were competing against each
and service'' was regarded as a critical success other. . . To solve the problem, we got an
factor for survival and thus MAS played an outside ®rm dealing in marketing to give us
important role in supplying information for the advice on this. . .
purpose. For example, BC used information for
quality controls to a large extent. Although the Surprisingly, mature case ®rms decrease sig-
company outsourced its production, it always ni®cantly their reliance on environmental scanning
maintained tight quality control by frequent as compared to growth ®rms. However, ®eld data
reporting from sub-contractors as well as on-site provide mixed results. For example, YPL con-
visits. It had a team of sta with regard to quality sidered environmental scanning as important in
control. This was consistent with its `àggressive order to ``counter'' competition from cheap
build'' mission as a growth ®rm. In achieving its imports. Accordingly, information concerning
mission, BC was able to create a strong brand their competitors was regarded more important
awareness among its customers through emphasis on than customer-based information as required by
quality and adaptation to constant changes. This is ®rms at earlier stages. As evidenced in YPL, its
particularly reinforced in the advertising pamphlets management normally gained access to external
Color My World distributed to potential customers information through contacts with their peers in
through BC's sales executives. It states: dierent segments of the industry. As YPL's
managing director remarked:
. . .The vibrancy of life is expressed through the
strength of colors and designs. Stylish, comfor- In the clothing industry, as we are increas-
table garments in quality fabrics that are soft ingly under pressure from import competi-
on the skin but tough on wear, combine with a tion, we have recognized that our major
color palette that excites the emotions. . . competitors are not local but overseas. The
best way to counter our overseas competitors increasingly complex activities. BC's Financial
is to `stock' ourselves locally. We share a lot Accountant explained how its MAS was able to
of information with the industry generally. . . supply integrated information:
Diering from YPL, both DF and RS relied on We have all the order entries which go down
environmental scanning to the least extent. For to the invoicing stage which is on-line stock
example, DF only focused on customers' needs up-dating. When the invoice is issued, the
rather than the competitors' strategy. Its managing stock is automatically decreased and shown
director claimed that the ®rm was in the second or on the record. We can also track the production
third position in the industry so that they seldom receipts and sales issues. With our on-line stock
follow the lead of competitors in terms of quality record, our telephone operators are able to
with its ``comfort shoes''. take any telephone orders from the sales
In summary, ®ndings from both mail survey and executives up to a certain level as available.
®eld data oer reasonable support for H2 (a). The production department is also made
Growth ®rms do certainly select and rely upon a aware of the stock levels and ensure when to
broader range of management accounting tools order from the sub-contractors.
than do ®rms at other stages. However, signi®cant
dierences were found in a majority of selection This was contrary to the mature case ®rm, RS,
attributes between growth and maturity stages which only relied on a lower level of aggregation
which oer the insight that ®rms narrow their of information. As discussed before, the managing
range of formal management accounting tools as director of RS explained that a high level of
they consolidate their activities. Also, it would aggregation would only supply general informa-
appear that ®rms tend to rely increasingly on tion that required more time for synthesis.
informal tools for managing transition from As posited, the management of birth ®rms
growth to maturity. appears to request a much narrower scope of
information than those at other stages. For
7.2.2. Presentation of information Ð Hypothesis growth and revival stages, a wide range of infor-
2 (b) mation was required in terms of focus, quanti®ca-
In terms of presentation of information, ®ndings tion and time-horizon (Tables 4 and 5). These
from both quantitative and qualitative data ana- results oer some support for H2 (b) and are con-
lyses oer some support for H2 (b). In general, sistent with the ®ndings of other studies (Chenhall
®rms at growth and revival stages exhibit higher & Morris, 1986; Gul, 1991; Gul & Chia, 1994; Mia
levels of aggregation and integration and rely on & Chenhall, 1994; Mia & Goyal, 1991). Data from
more timely information than those at other stages the ®eld studies also reveal that the scope of
(Tables 4 and 5). However, signi®cant dierences information was wide in ®rms at both the growth
across stages were only found in aggregation and and revival stages, showing relatively equal
integration in terms of combination over functional emphasis on all types of information in terms of
areas; scope of information in terms of internal, focus, quanti®cation and time-horizon (Table 7).
®nancial and future information; timeliness in terms These MAS attributes are appropriate to the
of time-lag in receiving information. diversi®cation and expansion activities as envi-
In terms of aggregation and integration of saged in growth and revival ®rms. Speci®cally,
information, the results from survey responses signi®cant dierences were mainly found in reli-
indicate a high combination of information over ance on internal, ®nancial and future-oriented
functional areas at the growth and revival stages. information as ®rms transit from growth to
In particular, the level is distinguished more sig- maturity stages.
ni®cantly from growth to maturity stages. This is Analysis of speci®c MAS attributes using quan-
supported by ®eld data that BC (a growth case titative data suggests that ®rms at all stages relied
®rm) had a highly integrated MAS to cater for its heavily on internal information. However, ®eld
evidence reveals mixed results. All case ®rms tend forecasting system. Its managing director
to rely heavily on internal information except remarked:
mature ®rms like HBC and RS. For example, in
the case of HBC, as the local market became A forecasting system has been developed in-
saturated, it was planning to expand geo- house and data is being transferred regularly
graphically. To accord with its expansion strategy, to its supplier. The company has also instal-
HBC relied more on external than internal infor- led a computer-aided design system and is
mation. Its director explained: designing a software program to monitor the
development of new styles or series for
We are planning to expand in both local and immediate future markets. . . The commit-
export markets. For the company to survive it ment to forecasting is the biggest bene®t and
must build 30% export. . . We just follow our most necessary element of Quick Response
current marketing and expansion strategies. and, in the last year, we have done a lot of
We are still in the exploring stage and external work in this area. . . Product development will
information such as overseas shows and dis- be faster and we will be able to ensure that
tributors is important to us. delivery dates are met. . .
Contrary to expectations, ®rms at growth and Results shown in Tables 4, 5 and 7 oer limited
revival stages regarded ®nancial information as support for H2 (b) relating to timeliness of infor-
more important than ®rms at maturity and decline mation. Sample ®rms at all stages do not show any
stages. Financial information, in particular pro®t- signi®cant dierences in their speed of reporting,
ability indicators, is expected to be essential for automatic reporting and frequency of reporting.
mature and decline ®rms to gauge their perfor- The scores reported for these attributes are rela-
mance against external threats. However, ®eld tively high. This suggests that timely information
data suggests that not all mature case ®rms relied is important to clothing and footwear businesses
on ®nancial information to a great extent. For regardless of their life-cycle stages perhaps due to
example, YPL did not mainly rely on ®nancial the constantly changing nature of the fashion
information for performance measures. Its mana- industry.
ging director stated: However, signi®cant dierences were found in
the time-lag in receiving information, suggesting a
We mainly use sales growth rates and pro®t much shorter duration at the birth, growth and
margins as performance evaluation measures. revival stages as compared with other stages.
However, we use qualitative measures to These dierences are more prominent in transition
supplement the ®nancial ones. . . We cannot from maturity to revival and from revival to
assess everybody individually on a quantita- decline. This accords with expectation that as
tive basis, but there is an overall assessment compared with ®rms at the maturity stage, ®rms at
on all that is done by personal judgment the revival stage are expected to require immediate
through responsible managers. . . reporting of any events which have occurred and
necessitate prompt action (Miller & Friesen, 1983,
The quantitative data is consistent with expec- 1984).
tations that only growth ®rms relied heavily on Consistent with expectations, ®rms at the
future information to facilitate their long-term decline stage indicated the longest time-lag in
planning. As supported by ®eld evidence, ®rms at receiving information as compared to ®rms at
later stages tended to use future information to a other stages. This may be explained by the inability
lesser extent than that of the ®rm at the growth of their MAS in providing prompt information.
stage. However, an exceptional case in a mature ®rm, However, with the nature of the industry in which
DF, indicated its heavy reliance on future informa- the business is operated, up-to-date information is
tion through its development of a sophisticated important in order to maintain competitive edges
in the markets. The managing director of LM (a and if so, is there a pattern of dierences in the
mature case ®rm) claimed: levels of MAS formality. Using Miller and Friesen's
(1983, 1984) ®ve-stage life-cycle model (namely
. . .In the industry, designs and fashions birth, growth, maturity, revival, and decline), a
change very quickly. Problems are multi- research framework was proposed. This frame-
tudinal [sic], shading in fabrics, short delivery, work incorporated key variables that have been
all those things that are epidemic in the evidenced in the literature as related to MAS design.
industry because there are so many variances. Rather than analyzing the four key variables (strat-
Information systems are used extensively to egy, structure, leadership and decision-making
give you data very quickly so that you can react styles) in a piecemeal approach, this study adopted
to the problems immediately. . . In Australia the a con®gurational approach to examine them sys-
kind of market segmentation is such that there tematically. Two main hypotheses were derived
are a small number of major accounts. Some from the literature review, suggesting an expected
people only deal with them by hand. How- pattern of MAS formality across stages and the
ever, once you are selling your products to nature of dierent attributes based on the life-
boutiques, say a few thousands, it becomes cycle con®gurations at each stage.
nearly impossible using a manual system. Com- Findings from both the cross-sectional data and
puters allow the business to increase its market ®eld studies oer some support for the hypotheses,
share without increasing costs. By using the ®g- in particular, the overall theme. In summary, the
ures obtained immediately from the computers, results suggested that MAS attributes diered as
one can analyze the trends or otherwise. ®rms transit from one stage to the next. In partic-
ular, growth dominates other stages in creating
Field evidence suggests that up-to-date infor- needs for formal MAS design. Furthermore, the
mation is important for product innovation and selection of management accounting tools is far
quality service in order to gain competitive more important than presentation of information
advantages. Management requires immediate in varying levels of MAS formality at each life-
information in order to be ¯exible to accom- cycle stage. MAS formality increases from birth to
modate market demands in the clothing industry. growth and from maturity to revival, but the
In summary, ®ndings from both mail survey and decreases in MAS formality are more signi®cant
®eld data oer some support for H2 (b) with when ®rms transit from growth to maturity and
growth and revival ®rms exhibiting the highest from revival to decline. While based on cross-sec-
levels of sophistication in the presentation of their tional data the homogeneity of organizational
management accounting information. Signi®cant con®gurations at each life-cycle stage does suggest
dierences were found in a number of presenta- that these results imply a longitudinal develop-
tion attributes between growth and maturity ment of MAS.
stages which oer the insight that ®rms decrease Are these MAS changes part of a necessary
the levels of aggregation and narrow the focus in organizational response to external competitive
presenting information as they consolidate their forces or are they driven by a necessity to maintain
activities. However, signi®cant changes in time-lag an internal equilibrium? Or perhaps the changes
in receiving information were observed during arise from the need to balance these internal and
transitions from maturity to revival and from external imperatives. The approach adopted in
revival to decline. this study is more in keeping with the latter. As
such we do not seek to answer the question of
whether one factor, such as competitive forces or
8. Conclusions and limitations origins, in terms of say predisposition to MAS,
might be driving the changes.
The aim of this study was to explore whether The results implied MAS were able to facilitate
MAS dier across stages of organizational life cycle, ®rms pursuing their respective strategies while
exercising necessary controls as required at dierent While cluster analysis may be superior to CEO's
stages. Firms at the Birth stage were able to rely self-categorizations of life-cycle stages due to its
less on formal systems due to a homogeneous statistical properties, certain procedures involved
product/market and simple structure. As ®rms in this technique rely on subjective and intuitive
enter Growth stages, the level of administrative judgements. These include determination of which
tasks far exceeded the capacity of the existing algorithm to be employed, which distance mea-
MAS. Consequently, ®rms formalized their MAS sures to be used, and the number of clusters to be
in order to deal with the more diverse and com- extracted, together with labeling the clusters. This
plex structures than those prevailing at the birth study adopted the widely used and recommended
stage. Well-established Mature ®rms built up their hierarchical agglomerative technique with Ward's
own intelligence systems over time, but with method for distance measures as these have been
increasing levels of stability they were able to found to outperform most other clustering tech-
reduce the formality of their systems. If stability niques (Aldenderfer & Blash®eld, 1984). Further-
was superseded by poor performance, then ®rms more, the subjectivity involved in determining the
needed to revive. To achieve the turnaround, number and labeling of clusters was minimized by
Revival ®rms resolved the crises by increasing their adoption of theory-based guidelines. These guide-
reliance on formal systems. As ®rms' activities lines were drawn from the Miller and Friesen's
became stagnant with limited resources at the (1983, 1984) ®ve-stage life-cycle model.
Decline stage, their MAS accordingly became less Limitations also arise where the data obtained
formal. were mainly from CEOs' self-reported measures of
Not only do the results from this study suggest all the constructs. As the majority of the ®rms
practical prescriptions for MAS design at each which participated in this study were not large in
life-cycle stage, they also provide evidence of how size, CEOs of these ®rms have a relatively com-
®rms adapted to their growth and development. plete understanding of the various aspects of the
Further analysis of ®eld study data revealed why organizational characteristics and MAS attributes.
and how ®rms formalize their MAS across life- They also had the ability to in¯uence the life-cycle
cycle stages. Firms tended to formalize their MAS con®gurations and MAS attributes across stages.
as they changed their strategies in gaining or The signi®cant contribution of this study is the
maintaining their competitive advantages; or when reinforcement of the bene®ts of applying the con-
their activities and structures became so complex ®gurational approach to examining MAS attri-
such that their existing systems were insucient. butes. The con®gurational approach has provided
Most of the ®rms formalized their MAS by changing a parsimonious and precise research framework
from manual to computerized systems. This for identifying the inter-relationships among
enabled them to integrate all facets of operations organizational characteristics and MAS. By
within and outside the business. To accommodate incorporating the life-cycle theory to the research
for increased formality of MAS, ®rms tended to framework, this study explored the dynamic per-
rely on professionalism in management or external spective of MAS and provided results indicating
consultation. how and why MAS changed during organizational
Despite the fact that the ®ndings support the development. Future direction for MAS research
general theme as conveyed by the hypotheses, may consider advancing the con®gurational
there are some limitations that warrant acknow- approach by incorporating dierent types of
ledgment. With the limited sample size due to a taxonomies, such as Gordon and Miller's (1976)
low response rate, the results from the statistical organizational con®gurations. While the environ-
analyses have to be interpreted with care. Also, mental construct has been partially controlled by
generalization of ®ndings beyond the sample selecting a particular industry, future research can
industry might be dicult due to a limited sample select other industries to examine whether dier-
size, and in particular, the number of sample ®rms ent patterns of MAS exist. Instead of examining
that fell into some of the life-cycle stages was low. speci®c MAS attributes, future research could
extend Simons' (1995, 1999) works by examining sales executives doubled. BC is now operating in
the timing of control techniques employed by its own premises with over 40 employees, 500 sales
management in order to alter or maintain patterns executives in every State in Australia, with orders
of organizational activities across life-cycle stages. in excess 2000 per month generating an annual
In particular, how do managers use dierent control turnover of about $15 million.
systems (diagnostically or integratively) during their
growth and development, would be a worthwhile A3. Maturity stage
future research question. YPL has been a well-established industrial
clothing manufacturer and wholesaler for 72
years. It currently has 600 employees over dier-
Acknowledgements ent states of Australia. YPL's business is directed
into two areas, ®rst is to sell direct on a contract
The authors would like to acknowledge the basis to companies and second to operate the
helpful comments from the two anonymous review- retail end of the business. At this maturity stage
ers, Peter Booth, Richard Chung, Keith Duncan, when product-lines have been consolidated, com-
Michael Firth, Trevor Hopper, Peter Luckett and petition is not regarded as a major threat to the
Ray McNamara. Earlier versions of this paper were business. YPL has a very strong brand name. It is
presented at the AAANZ 1997 Conference, the 4th one of the few key players in industrial clothing
International Management Control Systems Con- manufacturing in Australia.
ference, workshops at the Bond University and the HBC, a boot manufacturer and wholesaler, was
Hong Kong Polytechnic University. founded in 1913 but the business became stagnant
due to poor ®nancial performance. In 1987, it was
taken over by the existing directors and traded
Appendix A. Background of case ®rms under its current name. Since then, the business
was revived with rapid growth in sales and pro®t-
A1. Birth stage ability. During the revival period, the sta num-
Established for 8 years, FF is a children's foot- bers have increased from eight to 14. It is now in
wear manufacturer and wholesaler operating from transition from revival to maturity and its director
the owner's home. Although its owner-manager claims that the company is now on track and
has categorized the ®rm as at its maturity stage, expects not to undertake any immediate large
FF has never been ®rmly established. Evidence scale expansion.
reveals that it is a birth ®rm striving for survival. RWF, established over 16 years ago in the form
It has always suered from inadequate sales and a of a unit trust, is one of the few surviving footwear
poor cash position. In view of the declining sales manufacturers and wholesalers in Queensland. It
and with an aim to solve its current liquidity crisis, manufactures about 50 or 60 styles a year and its
FF recently downsized by closing down its manu- wholesale products include quality imports from
facturing plants and dismissing the employees. Europe. Currently, it has a signi®cant number of
sta (45) as compared with other ®rms (about six).
A2. Growth stage Despite the shrinking industry due to cheap
BC manufactures children's clothing and sells imports, RWF is able to maintain a stable level of
directly through party planners. It was originally sales activities due to the wide range of products
operated as a ``cottage'' industry at a director's oered and good marketing skills.
home from August 1989. By the end of 1989, it Despite its short history of 15 years, DF has
had a total of 120 sales executives in various established a reputable brand name in manu-
states. Within the ®rst few weeks in 1990, BC facturing and wholesaling ladies footwear. In the
experienced an unexpected dramatic growth of late eighties, DF's business was becoming stagnant
600% in sales when it had just launched a new but it then moved to revival stage through legal
range of products. At that time, the number of restructuring from a unit trust to proprietary limited
status. It has gone through its revival and is secured a major client at the end of 1993. At the
approaching maturity again with 250 employees. same time, AF employed a sales representative
DF has introduced Just-In-Time Manufacturing who successfully put their label on the market.
and initiated the ``Quick Response'' philosophy, Concurrently, the market demand was also the
especially towards retailers. As a result, they reduced driving force for the ®rm's revival. At this stage,
their work-in-progress from between 4 to 6 weeks to the ®rm is expanding its operating premises and
5 or 6 days and they are able to oer very quick increasing the number of employees to over
deliveries. Currently, DF has an annual turnover twenty to cope with the reviving business.
between $30 and $35 million, and is regarded as CC is a ladies fashion clothing manufacturing and
one of the most reputable ®rms in the industry. wholesaling entity. It has been established for 12
LM has been operating for 42 years in manu- years and currently has about 40 employees. CC
facturing, wholesaling and retailing ladies and underwent rapid changes by broadening its product
children's sleepwear and babywear. The revival of lines and moved into its current premises about 7
the business began 3 years ago when import quo- years ago. At this stage, CC is going through pro-
tas were removed and duties were dropped. Cur- cesses of consolidation of product lines and struc-
rently, LM has approached its maturity stage with ture. Accordingly, its current sales growth rates and
its manufacturing operations mainly carried out in pro®tability have been stabilized.
China. It serves all levels of retail markets in Aus-
tralia, from discount stores to individual boutiques
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Management Accounting Systems and Organizational Con®guration: A Life-Cycle Perspective

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Accounting, Organizations and Society 26 (2001) 351±389